In retaliation, Egypt slapped reciprocal visa requirements on Libyans - although officials in both capitals were quick to play down the incident which some observers speculated was linked to Egyptian media reports critical of Libya.
The problems at the border began on Friday when, according to Egyptian border police, about 300 Egyptians were turned away at the Sallum border crossing with Libya. Another 400 were sent back on Saturday.
The border guards also demanded the Egyptians should show them work contracts and proof they had at least $350 before letting them cross.
About 25 lorries were also denied entry, the border police added.
In retaliation, Egyptian authorities refused entry to "more than 1000" Libyans, the Al-Akhbar daily reported in Cairo on Saturday.
Libyans landing at Cairo airport were also told they had to have a visa issued by an Egyptian embassy abroad, or purchase one upon arrival, airport sources told AFP.
Egyptians had previously needed only identity papers to cross the border.
Tripoli's surprise move caught out many Egyptians who live in Libya and who tried to return after celebrating the New Year back home, Egypt's state-owned media said.
But things began to get muddled when Tripoli later on Friday dismissed as "lies" the allegation it had imposed new visa restrictions on Egyptians.
"We have not imposed any entry visas on Egyptians in Libya; these are baseless lies," Deputy Foreign Minister Hassuna al-Shawsh told AFP.
Neither was Tripoli officially informed of Egypt's own decision to impose new visa restrictions, he added.
Egyptian Information Minister Muhammad Safwat al-Sharif also denied Libya had closed its border with his country and insisted "there were no "differences of opinion between Libya and Egypt."
Tripoli's decision last month to renounce efforts to develop weapons of mass destruction followed an "initiative of Egyptian President Hosni Mubarak to make the Middle East a WMD-free zone," he added.
The Libyan embassy in Egypt filed a complaint with the state prosecutor against 15 journalists from opposition and independent newspapers which allegedly criticised Libyan leader Muammar Qadhafi over his WMD decision
Egyptian journalists' union
But diplomatic sources in Tripoli put the bi-lateral tension in the context of Libyan "irritation" over a "campaign waged in the Egyptian press, including governmental newspapers, against Libya" for its WMD decision.
Egyptian newspapers quoted Israeli sources as saying meetings have taken place with Libya with a view to set up diplomatic relations between the two foes in light of the decision.
The Libyan embassy in Egypt filed a complaint with the state prosecutor against 15 journalists from opposition and independent newspapers which allegedly criticised Libyan leader Muammar Qadhafi over his WMD decision, the Egyptian journalists' union said on Saturday.