A police general was killed in an exchange of gunfire outside the town of Kerdasa, 14 km (9 miles), from the capital.
Dozens of police and army vehicles entered Kerdasa at daybreak in the second operation this week to restore control over areas where hostility to the authorities has grown since the army deposed President Mohamed Morsi on July 3.
"The security forces will not retreat until Kerdasa is cleansed of all terrorist and criminal nests," Interior Ministry spokesman Hany Abdel Latif told state media.
The police were hunting 140 suspects.
There had been little or no sign of state authority in Kerdasa since an August 14 attack on its main police station in which 11 officers were killed.
The building was hit with rocket-propelled grenades and torched after police had stormed pro-Morsi protest camps in Cairo and killed hundreds of his supporters.
State TV reported that the main suspects in the Kerdasa attack had been detained. Security sources said dozens of weapons, including rocket-propelled grenades, had been seized, and 41 people arrested.
Security forces blocked roads in and out of the town and helicopters flew overhead.
Militant attacks have been on the rise since the overthrow of the Islamist Morsi, Egypt's first freely-elected president.
The army is mounting an operation in the Sinai Peninsula against al Qaeda-inspired groups. Shootings and bomb attacks have also taken place in the Nile Valley - two members of the armed forces were shot dead in the Nile Delta on Tuesday.
In Cairo on Thursday, explosives experts defused two primitive bombs on the metro public transport system.
The authorities say they are in a new war on terror against Islamist militants. State media have labeled the Muslim Brotherhood, the group that propelled Morsi to power last year, as an enemy of the state.
TV footage showed members of the security forces in body armour and armed with automatic rifles fanning out in Kerdasa,
In a shoot-out in a nearby village, heavy gunfire was heard as police chased a group of men into side streets, the footage showed. Gunfire appeared to hit near a police position.
In a similar operation earlier this week, the security forces moved into the town of Delga in the southern province of Minya - another area known for Islamist sympathies and a major theatre for an insurrection waged by Islamists in the 1990s.
The August 14 attack on Kerdasa's police station was triggered by the security forces' operation against two pro-Morsi protest camps in Cairo. That led to the worst spasm of violence in Egypt's modern history, with more than 100 members of the security forces killed as well as the hundreds of Morsi supporters.
Mass arrests have netted at least 2,000 people, mostly Morsi supporters, since his downfall. The former president and many Brotherhood leaders have been thrown in prison.
Egypt has been in a state of emergency since August 14 and large parts of the country remain under a nighttime curfew. The government decided on Thursday to shorten the hours of the curfew to start at midnight instead of 11 p.m. from Saturday