Unidentified militants infiltrated Israel early Monday, opening antitank fire against Israeli civilians building a security fence along the border with Egypt's turbulent Sinai desert, the Israeli military said.
Israeli radio and TV stations reported that one worker was killed and that an explosive device was also set off during the attack. Military spokesman Brig.-Gen. Yoav Mordechai told Israel Radio that one militant was shot dead by forces who arrived at the scene.
He said other militants were believed to be at large and that troops were searching for them. Israelis living in the area were asked to remain inside their communities until the military concludes its search, and two major roads in the area were closed to civilian traffic, he said.
The incident underscored the Egyptian government's increasing loss of control over the Sinai, where political turmoil, weak policing and difficult terrain have encouraged Islamic militant activity in the region.
Israel had been bracing for the possibility of attacks from the area after rockets believed fired from Sinai struck southern Israel over the weekend.
Last August, gunmen from Sinai crossed into Israel and ambushed vehicles on a desert highway, killing eight Israelis. Six Egyptians were killed in Israel's subsequent hunt for the militants, causing a diplomatic crisis that ended with an Israeli apology.
In response to the growing threat, Israel has increased its surveillance on the Egyptian border and is building an electronic barrier along the 230-kilometer frontier in a bid to keep out both militants and illegal migrants from Africa.