Egypt's army has said more than 100 fighters and 17 soldiers were killed after simultaneous assaults on military checkpoints in North Sinai, in the deadliest fighting in years in the peninsula.
A group pledging allegiance to the Islamic State of Iraq and the Levant (ISIL) group, the Province of Sinai, claimed responsibility for attacks on more than 15 security sites on Wednesday.
Some security sources put the death toll for army and police much higher than the official figure.
After a day of fighting, which involved F-16 jets and Apache helicopters, the army said it would not stop its operations until it had cleared the area of all "terrorist concentrations".
Military spokesman Mohamed Sanir, speaking to state television, said the situation in North Sinai was "100 percent under control" by late Wednesday.
Armed groups in the Sinai Peninsula have stepped up their campaign against the Cairo government since 2013, when then-army chief Abdel Fattah el-Sisi toppled President Mohamed Morsi of the Muslim Brotherhood after mass protests against his rule.
Hundreds of police and soldiers have been killed in attacks and there is concern that fighters of the Province of Sinai group, previously known as Ansar Bait al-Maqdis, are operating beyond the Sinai.
On Monday, Egypt's prosecutor-general was assassinated in a car bomb bearing the hallmarks of the group.
In response, Sisi ordered his cabinet to introduce tougher laws to tackle what he calls terrorism.
On Wednesday, police raided an apartment in Cairo, killing members of the outlawed Muslim Brotherhood group.
The interior ministry said the victims were fugitive leaders who were plotting attacks - something the group denies.
Tarek Masoud, a professor of international relations at Harvard University, said the insurgency in Sinai has now reached a "fever pitch".
"We see that insurgents look capable of actually holding territory and threatening the military in a very dramatic way. It's very worrisome," he told Al Jazeera.
"Add to that steady attacks happening within Egypt proper, in the Nile Valley. This is one of the most tense and unstable periods in Egypt's modern history."
He said most men joining armed groups in Sinai come from tribes with longstanding grievances against the Egyptian government.
"Sinai is generally underdeveloped, except some enclaves where there is tourism. The Arab tribes generally feel they have received much less than their fair share from the central Egyptian state.
The groups also draw in "some disgruntled Islamists and people who've become alienated from the Egyptian political system after July 2013 when Morsi was overthrown and the regime began its crackdown on the Muslim Brotherhood and political Islamists more broadly," Masoud continued, adding that there are also unconfirmed reports of foreign fighters joining their ranks.
An army statement said Wednesday's fighting in Sinai had been concentrated in the towns of Sheikh Zuweid and Rafah.
Fighters took over rooftops and fired rocket-propelled grenades at a police station in Sheikh Zuweid after mining its exits to block reinforcements, a police colonel said.
"This is war," a senior military officer told the AFP news agency. "It's unprecedented in the number of terrorists involved and the type of weapons they are using."
Source: Al Jazeera and agencies