Boston University experts found the 31km (19 mile) wide crater while studying satellite images of the area.
It is more than twice the size of the next largest Saharan impact depression and more than 25 times the size of Arizona's famous Meteor Crater.
The American team that found it says its sheer size may have helped it escape detection all these years.
The structure, which has an outer rim surrounding an inner ring, has been named "Kebira", which means "large" in Arabic and also relates to the crater's physical location on the northern tip of the Gilf Kebir region in southwest Egypt.
"Kebira may have escaped recognition because it is so large," said Dr Farouk El-Baz, director of the Boston University Center for Remote Sensing, where the find was made.
"Also, the search for craters typically concentrates on small features, especially those that can be identified on the ground. The advantage of a view from space is that it allows us to see regional patterns and the big picture."
Desert glass
Water and wind erosion may also have helped hide its extra-terrestrial origin.
The heat from this impact may be responsible for the extensive field of "Desert Glass", yellow-green silica glass fragments found on the desert surface between the giant dunes of the Great Sand Sea in southwestern Egypt.
The crater's vast area suggests the location may have been hit by a meteorite equivalent in size to the diameter of the famous Meteor (or Barringer) Crater in Arizona which is 1.2km across.
The impact would have wreaked devastation for hundreds of kilometres.
The 65 million-year-old Chicxulub crater in Mexico is estimated to be 160 to 240km (100 to 150 miles) wide and is a likely culprit in the extinction of the dinosaurs.
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