Officials had suspected an al Qaeda-inspired bomber was behind the blast that ripped through a crowd outside the church in the city of Alexandria, prompting protests by Christians that the state had not done enough to protect them.
The Army of Islam considers leaders of al Qaeda as spiritual mentors and endorses its ideology, though it has never admitted direct links to the group.
An Iraq-based al Qaeda group had called for attacks on Egypt's Christians, who make up one tenth of the population, before the church bombing.
"If elements of the Palestinian Army of Islam, linked to al Qaeda, thought they had hidden behind elements that were recruited, we have decisive proof of their heinous involvement in planning and carrying out such a villainous terrorist act," Interior Minister Habib el-Adli said in a speech.
President Hosni Mubarak, in an address broadcast on state TV, praised the police for finding out who was responsible for the bombing and said the attackers had "tried to sow discord between Copts and Muslims".
The Army of Islam played a part in a cross-border attack in 2006 in the Gaza Strip in which Israeli soldier Gilad Shalit was abducted. The group later cut relations with Hamas, the group which controls Gaza, and has clashed with Hamas.
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