A local official said: "The decree has been around for years but we have never asked any citizen to leave his home or lands to this day."
He said that the decree to move all buildings 150m from the border was not being implemented.
Ahmed Abdel Hamid, the north Sinai governor, said: "These rumours have absolutely no basis in fact".
Israel has long complained about extensive smuggling of people and weapons through tunnels underneath houses in the divided border city of Rafah.
Local Bedouins have been angered in recent months by the numerous security sweeps.
Around 5,000 Palestinians remain trapped in increasingly dire conditions on the Egyptian side of the Rafah crossing since it was closed last month after Hamas forcibly took over the Gaza Strip.
Egypt has since dispatched hundreds of police reinforcements to the area to prevent any Palestinian attempt to force the crossing.
Sudanese refugees are also often caught in the area trying to cross the border into Israel seeking jobs.