The nearly 2-mile long tunnel is the longest discovered by Egypt since it began creating a buffer zone in Rafah last fall.
Egyptian border guards say they found the 2.8-kilometer long tunnel under the yards of three homes in the Sinai border town of Rafah.
Since the ouster of Egypt's first democratically elected president in 2013, the Muslim Brotherhood-backed Muhammad Morsi, Egyptian security forces have battled a series of extremist groups in Northern Sinai.
Rafah has been target of an anti-smuggling operation after 33 Egyptian soldiers were killed in an October 2014 bombing in the northern Sinai Peninsula. Shortly after the attacks, Egyptian Islamist group Ansar Beit al-Maqdis, based in the Sinai Peninsula, pledged loyalty to the Islamic State.
Both events led Egypt to demolish several homes in Rafah in order to establish an 8-mile long, nearly mile-deep buffer zone between Gaza and Sinai and eliminate smuggling tunnels used to transport weapons and supplies between the two regions.
In early November roughly 10,000 residents of the town were given 48 hours to evacuate their homes and financial compensation that residents at the time described as inadequate.
Qatari-funded newspaper al-Araby al-Jadeed quoted an unnamed Western diplomat who said the buffer was spawned from the Egyptian-proposed ceasefire in Gaza that Israel agreed to in August 2014, which ended nearly two months of Israeli military operations in the area bordering Sinai. In return for a halt to the fighting, Israel allegedly demanded Egypt create the buffer with Gaza.
The Egyptian military said earlier this month that over 1,000 homes had been demolished during the second phase of the operation.
The longest tunnel found by Egyptian forces before Sunday was uncovered two weeks agoand stretched 2 kilometers, or 1 mile and 427 yards. Before then, a tunnel as long as 1,700 meters -- or just over a mile -- had taken the record.
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