Sheikh Shawki Allam, the Grand Mutfi, said the digital crypto-currency carried risks of "fraudulence, lack of knowledge, and cheating".
Bitcoin began last year below $1,000 (£737) but reached nearly $20,000 before the end of the year.
Then it lost more than 25% of its value inside a week, sparking warnings of a dangerous bubble.
The Grand Mufti said risks could arise because the virtual currency was not subject to surveillance by any centralised authority.
"Bitcoin is forbidden in Sharia as it causes harm to individuals, groups and institutions," the fatwa said, as reported by Egyptian daily Ahram
In August 2017, Egypt's first bitcoin exchange was opened. The crypto-currency was declared illegitimate by the authorities last month.