The city and cemetery -- likely home to senior functionaries and grave builders -- was discovered about 400 metres from the Temple of Seti I in the ancient city of Abydos in southern Egypt, said antiquities minister Mahmoud Afifi yesterday.
It is believed to date back to 5316 BC.
Excavators found huts, pottery and stone instruments, Afifi said.
They also discovered 15 large graves -- some of them even larger than royal graves in Abydos -- suggesting they housed the bodies of important figures.
The city of Abydos, founded by predynastic rulers, is famed for its temples such as that of Seti I and its graves.
Egypt is rich with ancient sites built by the pharaohs, but years of unrest and jihadist attacks have driven away many tourists.