Egypt is constructing a walled camp in the Sinai Peninsula to receive displaced Palestinian civilians from the Gaza Strip, a US media report and an Egyptian human rights monitor said on Friday.

A satellite picture shows machinery building a wall along the Egypt-Gaza Strip border in Rafah, Egypt.

But Israel, which is waging a four-month-old war against Hamas militants in the territory, said it had no plans to move civilians there, as it prepares an offensive in Rafah, in Gaza's far south.

The Wall Street Journal said an eight-square-mile (21-square-kilometre) "walled enclosure" was under construction on the Egyptian side of the border.

The compound was part of "contingency plans" if ceasefire talks in Cairo failed and could accommodate more than 100,000 people, it added.

The Sinai Foundation for Human Rights, an Egyptian NGO, released a report this week that it said showed construction of the compound to receive Palestinian refugees "in the case of a mass exodus".

A camp for displaced Palestinians near the border fence between Gaza and Egypt.

AFP reviewed satellite pictures taken on Thursday of the area in northern Sinai, showing machinery building a wall along the Egypt-Gaza border. The area is highly secure and closed to journalists.

A comparison of satellite photos taken on February 10 and February 15 shows land having been graded.

North Sinai governor Mohamed Shousha has denied Egypt is preparing "an isolated area in Sinai" to receive refugees.

The construction work was to assess houses destroyed during upheaval in recent years to "properly compensate" owners, he said Thursday.

The Sinai Foundation for Human Rights said two contractors told it construction firms had been tasked with building the gated area, "surrounded by seven-metre-high walls".

The site lies on the "rubble" of Egyptian homes "demolished" during the state's war against Islamist insurgents in northern Sinai over the past decade, it said.

Sources in Sinai told AFP the area was being prepared in case of a breach of the Gaza border, which Egypt has fortified with additional walls and buffer zones since Israel's war with Hamas began.

"The area will be readied with tents" and humanitarian assistance would be delivered inside, said one source who spoke on condition of anonymity.

A mass of tents and shelters sheltering refugees in Rafah.

- Warning -

Egypt, which controls the Rafah border crossing from Gaza, has repeatedly warned against any "forced displacement" of Palestinians from Gaza into the Sinai desert.

President Abdel Fattah al-Sisi has said if that happened it could jeopardise the peace treaty Egypt signed with Israel in 1979.

UN High Commissioner for Refugees Filippo Grandi expressed understanding for Egypt's opposition to any mass exodus.

"It would be catastrophic for Palestinians... to be displaced again," Grandi told the BBC on Friday.

"It would be catastrophic for Egypt from all points of view, and more important than anything else, a further refugee crisis would be almost the nail in the coffin of a future peace process already."

Some 1.4 million people -- more than half the population of Gaza -- are currently crammed into the city of Rafah on the Egyptian border, after escaping intense Israeli bombardment elsewhere in the territory.

But the Israeli military is facing growing calls not to go into the city, because of fears it could lead to heavy civilian casualties and worsen an acute humanitarian crisis.

In Tel Aviv on Friday, Defence Minister Yoav Gallant said Israel had "no intention of evacuating Palestinian civilians to Egypt".

"We respect and value our peace agreement with Egypt, which is a cornerstone of stability in the region as well as an important partner," he added.

Of military action in Rafah, Gallant said: "We are thoroughly planning future operations in Rafah, which is a significant Hamas stronghold."

He said operations would not target civilians, who  are facing "unprecedented" levels of "near famine-like conditions", according to the UN Food and Agriculture Organization.

Israel has besieged the Gaza Strip since October 7, when Hamas fighters launched a deadly assault on border communities in southern Israel.

Some 1,160 died, according to an AFP tally based on official Israeli figures, while about 250 were taken hostage. Israel estimates that some 130 are still in Gaza but 30 may be dead.

According to the health ministry in Hamas-run Gaza, at least 28,775 people have been killed in the territory since the start of the war.