Actually, this is a controversial issue among jurists and even among doctors. It has sparked off fierce debate in Egypt whereby scholars and doctors are split into proponents and opponents.
However, the most moderate opinion and the most likely one to be correct is in favor of practicing circumcision in the moderate Islamic way indicated in some of the Prophet's hadiths even though such hadiths are not confirmed to be authentic. It is reported that the Prophet (peace and blessings be upon him) said to a midwife: "Reduce the size of the clitoris but do not exceed the limit, for that is better for her health and is preferred by husbands". The hadith indicates that circumcision is better for a woman's health and it enhances her conjugal relation with her husband. It's noteworthy that the Prophet's saying "do not exceed the limit" means do not totally remove the clitoris.
Actually, Muslim countries differ over the issue of female circumcision; some countries sanction it whereas others do not. Anyhow, it is not obligatory, whoever finds it serving the interest of his daughters should do it, and I personally support this under the current circumstances in the modern world. But whoever chooses not to do it is not considered to have committed a sin for it is mainly meant to dignify women as held by scholars.
As for male circumcision, it is one of the obligatory practices in Islam. Scholars even hold that whoever finds that some Muslims have stopped practicing male circumcision should force them to revert to this Sunnah [practice] that characterizes the Muslim nation.