A Muslim mob accused of stripping a Christian grandmother naked and parading her in the streets in Egypt have had the case against them dropped, reports say.

According to the Associated Press, prosecutors said they didn't have enough evidence to convict the accused.

The incident occurred in May 2016, when 70-year-old Souad Thabet – alleged to be the mother of a man who was romantically involved with a Muslim woman – was stripped naked by a group of 300 Muslims and paraded through the streets of her village in Minya province.

Her lawyer, Eihab Ramzy, told AP that the decision to drop the case is "a calamity".

"The preliminary investigation heard testimonies supporting her [the victim's] account from family members and policemen at the scene," he said, adding that local authorities had asked the victim and her family to make peace with their Muslim neighbours.

Thabet told a US-based Christian TV station that she and her family have faced further threats from Muslim extremists and cannot return home.

"The government is allowing the oppressors to walk free on the streets," she said. "This is our village that we were born and raised in... How can we be the victims and not be able to return to our village and homes?"

Egypt has an estimated population of nine million Christians. Mostly Orthodox Copts, they account for about 10 per cent of Egypt's population, which is overwhelmingly Sunni Muslim.

Tensions between Christians and Muslims have intensified since the Arab Spring of 2011.

Last year saw a string of attacks against Christians, including the burning of 15 Christian homes and a Christian-run kindergarten in Minya, and the murder on 30 June of Rafael Moussa, a Coptic Orthodox priest of the church of St. George. In December, ISIS claimed at attack on a Coptic Cathedral in Cairo that killed 27 people and on Christmas day a Coptic Christian couple were found stabbed to death in their beds.

President Abdel Fattah al-Sisi at the time denounced the attack against Thabet, and has pledged to unite Egypt during his time in power. "What is happening in Egypt is unacceptable and must never happen again... anyone who made a mistake no matter how many they are, will be held accountable," he said.

However, sectarian violence often erupts on the back of rumours about inter-faith romances or suspicions that Christians are building churches without the required official permission.

Homes are burned, crops are razed, churches are attacked and, occasionally, Copts are forced to leave their villages, say human rights groups and residents of the Minya, which is home to Egypt's largest Christian community.

Additional reporting by Reuters.