As Egypt bowed out of the World Cup with a dramatic 3-2 defeat to a Lionel Messi-inspired Argentina in the last 16 on Tuesday, supporters in Cairo rose to applaud a team that had taken the country further than ever before.

"We're heartbroken because we believed we could go even further," said Ismail Fawzy, 39, who watched the match with hundreds of supporters at a cafe in Cairo's eastern Heliopolis district.

"But when you think about everything this team has done, you can only be proud. They gave us memories we'll never forget.

"Yes, we lost, but history has already been made," he told AFP.

For the first time in a World Cup, Egypt won a match, advanced beyond the group stage and progressed through the first knockout round, in the process rewriting the nation's footballing history.

In the Heliopolis cafe, emotions swung between disappointment and pride after Argentina fought back late from two goals down to win. Tears flowed at the final whistle, but minutes later applause broke out as supporters stood and saluted the players' achievement.

"This isn't the ending we wanted," said Farida Hamdy, 27.

"But nobody can erase what these players have achieved. They made every Egyptian believe that we belong on the biggest stage."

For decades, Egypt's World Cup story had been one of near misses and unfulfilled potential.

Egypt were the first African and Arab nation to appear at the tournament in 1934 but exited early.

It then took 56 years for them to return, leaving Italy 1990 without a win. Their most recent appearance, in Russia in 2018, ended with three group-stage defeats.

"Before this World Cup, people talked about qualification as the dream," Hamdy told AFP.

"Now we've reached the last 16. The next generation will dream even bigger because of this team."

- Beyond Egypt -

The sense of pride stretched far beyond Egypt's borders.

More than 1,000 kilometres away in Gaza near Egypt's border, thousands of Palestinians gathered in makeshift cafes set up inside tents or built from corrugated metal salvaged from damaged buildings.

Generator-powered lights illuminated crowded viewing areas, while tangled electricity and internet cables stretched between rows of shelters.

Large screens were erected on football pitches scarred by war. Egyptian flags fluttered alongside Palestinian ones, while posters of Egypt coach Hossam Hassan and stars including Mohamed Salah and Omar Marmoush decorated the venues.

Children and women were among the spectators, while some of the wounded arrived on crutches or in battered wheelchairs pushed by relatives and friends.

The persistent buzz of Israeli drones could be heard overhead, occasionally punctuated by gunfire. For a few hours, however, many spectators were absorbed by the match.

In the occupied West Bank, thousands also gathered in Ramallah, where an industrial lot had been transformed into a fan zone.

"For Palestinians, Egypt is more than a sister nation or a neighbouring country," said Mohammed Saad, 60, who watched with his wife and children in Gaza.

"It is a symbol of love, shared history, common sacrifice and a bond that unites us."

Egypt coach Hassan drew praise in Gaza after waving a Palestinian flag on the pitch following Egypt's victory over Australia in the previous round and dedicating the win to the Palestinian people.

At the pre-match press conference in Atlanta on Monday, Hassan said that the suffering of the Palestinian people was a "shame on the world" as he called on football to do more to come to their aid.

"When Hossam Hassan raised the Palestinian flag, it made us feel joy and freedom," said Mousa Abu Ismail, 28, from Gaza City.

"The world forgets Gaza, but Gaza feels present again in the US, Mexico and Canada and every place in the world.

"We feel that Egypt's national team has brought life back to Gaza."