By Ori Lewis

JERUSALEM (Reuters) - Israeli Prime Minister Benjamin Netanyahu on Thursday praised warming relations with Egypt and its president, Abdel Fattah al-Sisi, who ousted an Islamist government seen as hostile to ties between the neighbors.

Egypt was the first of a handful of Arab countries to recognize Israel, in 1979, but the downfall of Hosni Mubarak in 2011 brought to power the government of Mohamed Mursi of the Muslim Brotherhood, straining relations with Israel.

Cooperation has improved since Sisi took power in 2013, with Egypt battling Islamist insurgents in Sinai near its border with Israel and both countries wary of Gaza's Islamist rulers, Hamas.

At an event at the Egyptian ambassador's residence for Egypt's national day, Netanyahu called the countries' peace treaty an "anchor of stability and security in our region".

"I want to thank President al-Sisi for his leadership and for his efforts to advance peace between Israel and the Palestinians and in the broader Middle East." Netanyahu said in a speech.

"We welcome the effort to incorporate other Arab states in this larger effort of a broader peace between all the people of the Middle East."

Egypt's foreign minister, Sameh Shoukry, paid a rare visit to Israel this month to meet Netanyahu, offering Cairo's help to revive peace talks with the Palestinians. It was the first visit to the Jewish state by an Egyptian foreign minister in nine years.

In May, Sisi urged both sides to seize the opportunity to make peace, offering Israel the prospect of warmer ties if this were achieved.

(Editing by Robin Pomeroy)