An Egyptian navy vessel docked at a small port on Sinai’s Mediterranean coast caught fire on Thursday during an exchange of fire with militants loyal to ISIS.
The patrol carrier was docked on the coast of Rafah when it spotted the militants and began the exchange of fire.
The military's spokesman said in a statement that the boat went up in flames during the ensuing firefight.
"The (coastguard) launch crew suspected the movements of some terrorist elements on the coast, so it chased (them) and exchanged gunfire, which led to the launch catching fire without loss of life," said the statement posted to Facebook.
Egyptian army officials could not confirm immediate reports of casualties.
Israeli authorities commented on the matter and said they are not involved, and weren't asked to assist.
The burnt out vessel reportedly has the capacity to carry about 70 men, according to local reports, but it was not immediately clear how many people were on board when it was set ablaze.
The ship was a troop carrier that patrols Egypt’s territorial waters, and has frequently been used to transport army and police personnel to mainland Egypt.
The sea route avoids the overland journey through the Sinai Peninsula, where militants target government forces.
The Egyptian Army foiled a suicide car bomb attack on Wednesday at a military checkpoint between Cairo and Suez that was claimed by ISIS affiliates in Egypt.
Militants belonging to Ansar Beit al Maqdis, which is loyal to ISIS, have killed hundreds of soldiers and policemen in the Sinai peninsula since the military coup of 2013.
July 1 saw the north of Sinai engulfed with clouds of smoke, when over a 100 people died in confrontations between the Egyptian army and ISIS militants in Sheikh Zuwaid.
The army said that 17 soldiers died in the attack.
The ISIS rampage came days after Egypt’s top prosecutor was assassinated in a car bombing in Cairo.
The Egyptian government frequently blames the Muslim Brotherhood, to which deposed president Morsi belongs, for violent attacks in Sinai and elsewhere in the country.
However, the Brotherhood, which has been outlawed by the Egyptian government, has consistently reiterated its commitment to peaceful activism.