Under the current environment without changes, "it's a situation there that has risk," Pentagon spokesman Capt. Jeff Davis told reporters on Tuesday, referring to the ISIS presence.
Davis said the Pentagon is trying to determine how much of the monitoring mission can be done by advanced remote sensors and then decide the number of U.S. personnel needed at North Camp. Overall, there are about 700 U.S. troops in Sinai.
U.S. officials said the notification came after weeks of informal discussions between all the parties to the Multinational Force and Observers mission, which was also formally notified.
The troops would be moved into southern portions of Sinai.
Egypt and Israel signed a peace treaty in 1979 that the Multinational Force and Observers mission monitors compliance with. So far, neither Egypt nor Israel has commented publicly on the talks, and any significant changes would have to be approved by all signatories to the peace accord.
Defense officials told CNN that the U.S. believes the threat of militant attacks -- including from ISIS-related groups -- in northern Sinai, where the land mass borders Israel, is only growing.
The U.S., however, is adamant that it can still fulfill its treaty obligations and this move, if approved by the signatories, would not signal a U.S. military retreat in the face of an ISIS threat, the officials said.
They noted that improved unmanned remote sensing technology can be used to a greater extent to fulfill the treaty obligations to monitor military movements in Sinai. That is also a reason for a shifting of troops, officials said.
"The (Pentagon) supports the role being played by the Multinational Force and Observers in supporting the Treaty of Peace between Israel and Egypt," Defense Department spokesman Christopher Sherwood said in a statement. "We are in continuous contact with the MFO and adjust force protection capabilities as conditions warrant."
Some small, remote observer stations have already been closed. Most recently, in September, the mission evacuated personnel from a remote site in northeast Sinai because of the threat of attacks. Four U.S. service members were injured that month in a roadside attack
in Sinai believed to have been carried out by an ISIS affiliate there.
It was not clear if the Americans were the intended target, but within days, the Pentagon brought in 75 additional troops with armored personnel carriers and other equipment to enhance operations. Security upgrades have continued over time, especially in the more remote, smaller monitoring stations.
Officials said it's not clear yet exactly how many forces may shift from the North Camp further south if the plan is approved. It's not anticipated that the North Camp would be shut down. Other countries with troops there, such as Colombia, could also be impacted.
The North Camp, located at el Gorah, is the largest installation under the international operation. There are more than 20 additional sites, including observation posts and checkpoints that could be impacted by a shift of forces.
The U.S. wants to rely more on the unmanned sensors, such as cameras, but the military still has to ensure that whatever U.S. troops remain have the ability to defend themselves, the officials said.