The two countries share sea borders in the most south-eastern tip of the Mediterranean, where vast quantities of natural gas have been discovered.
The signing of the defence memorandum came during an official visit by Egypt's Minister of Defence and Military Production, Colonel General Sedki Sobhi.
No details of the memorandum were made public, but the two countries share common concerns for the safety of undersea natural gas infrastructure.
Egypt has agreed to buy gas from a natural gas field about 65 km south of Cyprus' shores.
Cyprus and Egypt have strong historical ties and their relations became even closer when Egypt provided Cyprus with guns in the 1960s.
Sobhi said relations became very close since the mid-1950s, when Cypriots were fighting a guerrillawar against Britishcolonial rule.
He said talks he had with his Cypriot counterpart Christoforos Fokaides offered an opportunity for consultations and discussion over issues of mutual concern regarding military cooperation.
"The talks were in the framework of joint efforts that serve our interest and protection of our security and our regions security," he added.
Sobhi added that the talks covered challenges facing the two countries "on top of which is the outbreak of terrorism which has become in the recent years a major threat to the Middle East and Europe."
"Talks focused on expanding areas of military cooperation... between our two nations over common issues and challenges threatening safety and security of this region," he said.
Illegal migration was also discussed, he added.
Sobhi said the talks and the defence memorandum are the practical application of the "Nicosia Announcement", a declaration of cooperation between the two countries which also involves Greece.
Fokaides said the agreement is only aimed at promoting bilateral relations and is not hostile to any country.
"It is not directed against any other country... it is an important step towards the deepening of our bilateral relations in the field of security and defence," he said.#
Source: Famagusta Gazette