The attackers reportedly detonated explosives under cars to block escape routes with burning wrecks before opening fire on the mosque in the north Sinai town of Bir al-Abd.
State media reported 235 deaths and victims, including 130 wounded, were rushed to local hospitals.
Resident Ashraf el-Hefny said many of the victims were workers at a nearby salt firm who had come for Friday services at the mosque, where 300 worshippers were gathered.
“Local people brought the wounded to hospital on their own cars and trucks,” he said.
No group immediately claimed responsibility, but Egypt’s Isis affiliate has in the past targeted Sufis several times in the area, along with other residents, workers and security forces.
Last year, the group beheaded a leading Sufi religious figure, blind sheikh Suleiman Abu Heraz, and posted photos of the killing online.
The Wahhabi sect that dominates Isis considers the Sufis heretics.
Two weeks ago, Egyptian President Abdel Fattah el-Sissi warned that the death cult was relocating to the Sinai and neighbouring Libya as its 2014 conquests in Syria and Iraq were rapidly reversed.
The last major Isis-held towns, Abu Kamal in Syria and Rawa in Iraq, were retaken last week.
On Thursday, Iraqi forces liberated more than 50 villages over 1,700 square miles of its western desert region in their final operation against the terrorist movement.
And in Syria, government troops were fighting to clear Isis from areas west of the River Euphrates.