Two Egyptian soldiers have been shot dead and eight others wounded while they were trying to arrest a leader of an al-Qaeda inspired rebel group in the Sinai peninsula, the Egyptian army has said.

The rebels fired celebratory gunfire in a village called Nagaa Shabana and paraded the corpse of one of the soldiers on Friday while it hung from a pole, witnesses said.

The military came under fire in the village of el-Mahdiya on Friday during an operation to arrest Shadi al-Menei, reportedly the leader of Ansar Beit al-Maqdis, a military spokesman said.

Colonel Ahmed Ali said in a statement that the army managed to kill three rebels in the gunfight, adding that helicopters were "currently dealing with the targets."

Sinai insurgency

Based in the sparsely populated area north of the peninsula, the rebels have pressed their attacks despite a massive army deployment, protesting a July 3 military coup that toppled former President Mohammed Morsi.

The al-Qaeda-linked group has claimed some of the deadliest attacks in Sinai that have killed dozens of soldiers and policemen.

The group claimed responsibility for a suicide car bombing that unsuccessfully targeted Egypt's interior minister in September.

Source: Agencies