Israeli soldiers posted along the Egyptian border on Monday opened fire at an Egyptian policemen they claim acted in a suspicious manner, the Israeli army said.
"The soldiers saw a suspect individual approach with a rifle which he was arming. They shot in the air and then towards him," an army spokeswoman said.
It was later established the man was a policeman and that he sustained a shoulder wound, army radio said.
A joint Israeli-Egyptian team will investigate the incident, the spokeswoman said.
The incident took place 20 kilometres (15 miles) north of the Israeli Red Sea resort of Eilat.
Army radio initially said the Israelis had returned fire after the Egyptian shot at them.