The sources said that the police had seized hand grenades, an assault rifle and ammunition when they made the arrests in al-Arish, a town on Egypt's Mediterranean coast.
MENA, Egypt's state news agency, reported that two police officers had been arrested in the raid. Quoting security sources, the report said that the officers were suspected of selling ammunition, not weapons, and denied reports of Palestinian involvement.
One of the sources, on the condition of anonymity, told Reuters: "Nine members of this network were caught red-handed while selling weapons and explosives on one of the streets in al-Arish to a group of Bedouin and Palestinians."
Al-Arish is a town on Egypt's Mediterranean coast with a mixed population of settled Bedouin, people from the Nile valley and assimilated people of Palestinian origin.
The Sinai peninsula has been the scene of a string of three deadly bomb attacks targeting popular Red Sea beach resorts over the past two years that have killed scores of people.
Palestinian fighters have also used Sinai to smuggle weapons through tunnels across the border into the Gaza Strip for use in fighting Israel.
Egypt has laid the blame for the Sinai bombings on locals, including Bedouin, with extreme Islamist views.