Israeli military spokesman Jonathan Conricus said the tunnel belonged to Palestinian Islamist movement Hamas and was intended for attacks as opposed to smuggling.
Conricus said as the tunnel entered Egyptian territory; the army was in contact with Cairo about its destruction but would not elaborate on the extent of the cooperation.
Conricus further claimed that the assessment came from the fact that the tunnel ran underneath the Gaza crossing, which was kept closed on Sunday, as well as below the gas and diesel pipelines into the Strip and a nearby IDF post.
The tunnel destroyed early Saturday morning is believed to have been a Hamas tunnel which stretched for nearly a kilometer running under the Kerem Shalom crossing near the gas pipeline and continued into Egyptian territory.
Fishermen from Gaza have often brought in catch from Egyptian territory to sidestep restrictions imposed by Israel's naval blockade of the enclave, which Israel maintains citing security concerns.
The tunnel stretched a total length of around a kilometre and a half, he said.
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"The message to the Gaza leadership and residents is clear - invest in life and not burial tunnels", Lieberman said in a statement.
The army stated that the tunnel had been identified and destroyed by a combination of advanced technology, intelligence and operational capability.
Violent riots raged in the Gaza Strip and across the West Bank as parts remain under military lock down following the shooting of a settler in the Nablus area last week, the Israel Defense Forces reported Friday.
The latest tunnel was the third destroyed since late October by Israel, but it comes at a particularly sensitive time.
Cross-border violence between Israel and Gaza has increased since US President Donald Trump's December 6 decision to recognize Jerusalem as the capital of Israel, a move that has angered Palestinians who see the city as the capital of their future state.
In early January Israel struck what is referred to as "central terror infrastructure" in the southern Gaza Strip following three mortar shells which were fired towards Israel.