Mohammed Saleh Flayfil, already wanted for his alleged role in last year's bomb attacks at the Taba resorts in the Sinai peninsula, was killed in the shootout in Ataqaa mountains, near Suez, said the police official on Monday.
Flayfil's wife was injured in the shooting, the official, speaking on condition of anonymity because he was not authorised to give information to the press, said.
Flayfil is being tried in absentia for the Taba bombings that killed 34 people and was one of the authorities' main suspects out of a list of 15 wanted in relation to the 23 July explosions that rocked Sharm al-Shaikh, killing scores of Egyptians and tourists.
Flayfil is a brother Suleiman Flayfil, one of the Taba attackers, who reportedly died in one of the explosions when he purportedly detonated his charges prematurely.
Egyptian investigators are focusing on the likelihood that homegrown militant cells in Sinai, possibly with international links, carried out the Sharm al-Shaikh attacks, in which two car bombs and a bomb in a knapsack ripped through
a luxury hotel, a neighborhood full of Egyptians and the entrance to a beach promenade.
The official death toll stands at 64, but hospitals say bodies still uncounted could bring it up to 88.