According to the Egyptian military, the 4x4 vehicle was carrying five militants and around 100 kilograms of explosives when the tank successfully halted its progress.
"When an Egyptian soldier used a tank to stop the vehicle three men, two women and two children happened to be in the area in front of the ambush during the blast", said a statement released by the army.
Moments later the vehicle is seen exploding, turning the road in a black cloud of smoke.
A heroic Egyptian tank crew was credited with saving up to 50 people from a auto bomb laden with explosives.
He added: 'The armed forces reiterates that such terrorist acts only strengthen our determination to continue to eradicate this terrorism in our beloved Sinai from the roots.
The ideology of the "Sinai Province" group is based on considering the army and police forces as "apostates" who should be killed to pave the way for the establishment of a caliphate state in Egypt.
Despite the shielding attempts of the security forces, at least seven people are reported to have died in the incident.
Seven civilians have been killed by a auto bomb that exploded at a security checkpoint in Egypt's Sinai Peninsula on Monday, Egypt's army spokesman have told Reuters news agency.