Egypt's army in October created a wide buffer zone in the border town of Rafah in the north of the Sinai Peninsula, where it says tunnels have allowed militants and weapons in from the Palestinian enclave.
"The large-scale destruction of at least 3,255 buildings in Rafah to counter the threat of smuggling tunnels was likely disproportionate and did not meet Egypt's obligations under international human rights law or the laws of war," HRW said.
Since July 2013 "the military has arbitrarily razed thousands of homes in a once-populated buffer zone on the border with the Gaza Strip, destroying entire neighborhoods and hundreds of hectares (acres) of farmland," the New York-based rights watchdog said.
Egypt has stepped up its battle against militants who have carried out ongoing attacks in the area since then army chief Abdel Fattah al-Sisi took power from Islamist president Mohammed Morsi in July 2013.
The majority of attacks have been claimed by Sinai Province, a group that declared affiliation with the Islamic State group last year.
Militants in the Sinai have killed scores of policemen and soldiers since Morsi's overthrow, vowing revenge against a crackdown on his supporters that has killed more than 1,400 people and jailed thousands.
"Destroying homes, neighborhoods, and livelihoods is a textbook example of how to lose a counterinsurgency campaign," said Sarah Leah Whitson, HRW head for the Middle East and North Africa.
The Egyptian government has failed to provide adequately for about 3,200 families after their eviction from their homes, HRW said, charging they received little warning of the evictions and inadequate compensation. more
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