The official, speaking on condition of anonymity, told AFP that Russia appears to have deployed special operations forces to an air base at Sid Barrani, which is located about 100 kilometers (60 miles) east of the Libyan border.
The official said the American military is monitoring the situation closely.
A Western diplomat, who also requested anonymity, confirmed reports that Russian forces are now at a western Egypt army "facility."
The move comes after forces of eastern Libya's military strongman Khalifa Haftar this month conceded the loss of a key oil export terminal they seized last year in ongoing fighting for the country's resource wealth.
The capture of Ras Lanuf and the other three eastern oil ports in September enabled Haftar to keep up his challenge to the authority of the UN-backed government in Tripoli and demand a major role in a replacement administration.
The Russian Defence Ministry denied special forces were in Sidi Barrani.
"There are no Russian special forces units in Sidi Barrani in Egypt," the ministry said in a statement.
"This is not the first time such leaks from anonymous sources in the Western media have excited the public."
Kremlin spokesman Dmitry Peskov said he had "no information" on any Russian troops being sent to Egypt, and he also denied Moscow had interest in deepening its activity in Libya.
Still, he added that Russia is interested in Libya's stabilization so the country "does not become a breeding ground for terrorist recruits."
Following the overthrow and killing of Muammar Gaddafi in 2011, an array of rivals has been vying for control of Libya.
Adding to the chaos, Daesh also established a presence in the North African country, though US-backed local forces expelled the jihadists from Sirte, the coastal city they once held.
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