Israeli troops killed three Egyptian policemen mistaken for Palestinian militants along the Gaza-Egypt border early Thursday, in what the army called a "professional and operational" mishap.
"It was a regrettable incident," Israeli Deputy Defense Minister Ze'ev Boim said, "with terrible results."
Israel immediately opened an investigation into the incident, which threatens to increase tensions between the two countries. The former enemies signed a peace agreement in 1979 but often have had shaky relations.
It happened in an area known for weapons smuggling, reports CBS News Correspondent Robert Berger.
In other developments:
Egypt condemned Israel's shooting of three Egyptian paramilitary police on the border with Gaza.
A statement issued by the foreign minister indicated that Egypt was not placated by Israeli Prime Minister Ariel Sharon's phone call apologizing to President Hosni Mubarak hours after the killing.
"Egypt condemns and strongly protests this regrettable incident," Foreign Minister Ahmed Aboul Gheit said in a statement.
However, according to a statement put out by Sharon's office, Mubarak thanked Sharon and said Egypt accepts the apology and understands that the incident was a mistake.
The timing of the incident is especially sensitive because Israel wants Egypt to help secure the Gaza Strip after Israel's planned withdrawal next year from the coastal area.
Aboul Gheit is scheduled to travel to Israel next week to discuss the Gaza withdrawal plan and the future of Palestinian Authority in the wake of Yasser Arafat's death.
Aboul Gheit, who will be making his first visit to Israel since his June appointment, is to travel with Egyptian intelligence chief Omar Suleiman, who has been mediating between Israel and the Palestinians on the Gaza plan.
In the statement released by his office, Sharon promised a quick investigation, and pledged to share the results with Egypt. He also said he was looking forward to the Egyptian delegation visiting next week.
Israeli army officials also apologized.
"We are really and truly sorry and we have offered the Egyptians aid," said Col. David Menachem, the acting Gaza commander, adding that he hoped the incident would not affect security cooperation with the Egyptians.
Thursday's incident occurred along the "Philadelphia Road," a volatile patrol road along the Gaza-Egypt border. Israeli troops and Palestinian militants often battle in the area, where Palestinians smuggle weapons through tunnels into the Gaza Strip.
Israel Radio reported that the Egyptian forces were part of a unit responsible for preventing arms and drug smuggling across the border. Earlier reports said identified the Egyptians killed as soldiers.
The Israeli army said its soldiers identified three Palestinian militants planting a bomb in the area. The outpost ordered troops in a tank to fire at the militants, but they mistakenly fired on the Egyptian policemen, who happened to be in the area at the time, the army said.
"The army has opened a thorough and deep investigation into the incident," the army said in a statement.
The army said the area is prone to militant activity and infiltration attempts. It expressed regret for killing the Egyptians and said it offered to assist in anyway possible.
"It's in a very delicate part of the border where we've had problems with terrorist infiltrations in the past," Foreign Ministry spokesman Mark Regev said, adding that Israel wants to maintain good relations with Egypt.