Egyptian state television said the explosion at a gas pipeline early Saturday in the Sinai Peninsula was a "terrorist operation".
One official quoted by the station said the "situation is very dangerous," and had yet to be contained, but stressed there were no reported causalities. The explosion occurred on a pipeline to Israel, DPA reported.
Video footage from the Gaza Strip, about 70 kilometres away, showed a huge smoke plume and flames erupting from the source of the explosion.
The television blamed "saboteurs" for the incident, saying they had taken advantage of the country's ongoing political unrest.
Analysts believe militant groups are present in the Sinai, in part owing to the political grievances of the Bedouin population against the central government in Cairo.
Also, the export of natural gas at preferred rates to the Jewish State is controversial in Egypt, the most populous Arab nation.