"The attack on the family happened yesterday when masked militants attacked their house. Eight people were killed and one person was severely injured," Abdel Fattah Harhor, North Sinai governor said.
"The militants planted bombs in a car parking area near the house that had six vehicles," security sources said.
Residents of the neighbourhood described the explosion as huge.
"Primary investigation shows that the killed people belonged to same family from Rafah. Police forces are currently searching for attackers responsible for the incident," Harhor said.
The attacks targeting police and military increased after the ouster of Islamist ex-president Mohamed Morsi in 2013 by military following massive protests against his rule.
Over 600 security personnel have been reported killed since then. The military has launched security campaigns in the area, arrested suspects and demolished houses that belong to terrorists, including those facilitating tunnels leading to the Gaza Strip.