Egypt began setting up a buffer zone along its border with the Palestinian Gaza Strip on Wednesday to prevent militant infiltration and arms smuggling following a wave of deadly attacks.
The move, which will see about 800 homes demolished, comes in the wake of a suicide bombing in the Sinai Peninsula Friday that killed at least 30 soldiers.
A senior official in northern Sinai said the creation of the buffer with the Palestinian territory was "vital for national security and stability."
The authorities want to establish a 500-metre (546 yard) wide buffer along about 10 kilometres (6.2 miles) of the border with Gaza, according to officials.
Witnesses in the border town of Rafah reported seeing dozens of families leaving, along with trucks loaded with furniture.
And bulldozers were reported to have begun destroying several long-abandoned houses along the frontier.
The authorities previously said the families affected would be compensated, but not all residents are convinced.
"We are for national and border security, but not at the cost of our homes and interests," said Wissam al-Agha, a doctor in Rafah, whose house and land fall in the area demarcated for the zone.
North Sinai Governor Abdel Fattah Harhur said emergency assistance will be provided to everyone, with families receiving 900 Egyptian pounds ($125/98 euros) to cover rent for three months.
He added, in remarks to reporters, that they will also receive monetary compensation for their properties.
An analyst said the buffer marks a shift in Egypt`s strategy to confront militant attacks.
"It is an operation to isolate terrorists in an area empty of people, in turn facilitating targeting of terrorists and also reducing civilian casualties," said Eman Ragad, an expert on regional security at Ahram Centre for Political and Strategic Studies.
"But we are not sure whether this area is a stronghold of terrorists or just an operational base."
Egypt suspects Palestinian militants of aiding jihadist attacks that have increased since the army ousted Islamist president Mohamed Morsi last year.
The military has also stepped up the destruction of tunnels with Gaza that it says are used to smuggle arms, food and money by Palestinian Hamas militant group.
The army says it has destroyed more than 1,600 such tunnels since Morsi`s ouster.
"Families whose houses have openings to these tunnels will not be compensated," governor Harhur told private television channel CBC Extra.
Following Friday`s bombing, Egypt imposed a three-month state of emergency in parts of northern Sinai and closed the Rafah crossing into Gaza -- the only entry to the Palestinian territory not controlled by Israel.
President Abdel Fattah al-Sisi said the attack was carried out with "external support," ordering heightened security measures.
Nobody has claimed responsibility for the bombing.
Jihadists in the peninsula have killed scores of policemen and soldiers since Morsi`s overthrow, vowing revenge against a police crackdown on his supporters that has left more than 1,400 dead.