The "Cleopatra 2017" manoeuvres follow last year's "Ramses 2016" exercises and are to last several days.
French and Egyptian Mistral warships, several frigates and F16 jet fighters are taking part, an Egyptian army spokesman said.
The exercises will take place in the Mediterranean and the Red Sea.
During a visit to Cairo in June, Defence Minister Jean-Yves Le Drian said the two countries had reaffirmed their shared point of view on the fight against terrorism.
Both France and Egypt are part of the US-led coalition of countries fighting the Islamic State armed group in Iraq and Syria and France has troops in Mali and other Sahel countries, where it has actively supported the creation of a force run by the G5 group of African countries to fight smuggling, people trafficking and armed Islamists.
Egypt is an important customer for French-built armaments.
Since 2015 it has bought 24 Rafale airplanes, a multimission FREMM frigate, 5.2-billion-euros-worth of missiles and two Mistrals worth about 950 million euros.