I'm aware that Ancient Egyptians did chart stars and have a relatively robust understanding of astronomy for the time. However, did they (say, in the 2nd millenium BC) practice astrology, such that they believed the stars and planets reveal or could be affected by human activities? Or did this only come about later, when it was more Hellenistic?
According to the main authoritiy on ancient astronomy and astrology, Otto Neugebauer, astrology was introduced to Hellenistic world from Babylon. (If you not know who he is, look at this Wikipedia article http://en.wikipedia.org/wiki/Otto_Neugebauer). Here is what he writes on Egypt in general:
This strongly contradicts to what many other authors (ancient and modern) say about Egyptian astronomy and mathematics, but on my opinion, Neugebauer had really studied this question carefully, unlike those other authors. The legends about Egyptian math and astronomy come from the Ancient Greece, and later they were uncritically repeated by other authors. Modern research shows that these are really legends.
Moreover, Neugebauer, who was mostly interested in the history of astronomy, also carefully studied Hellenistic horoscopes, trying to find there interesting information about astronomical knowledge. He places the origin of astrology at about -1000 in Babylon. This "science" penetrated to the West (including Egypt) after Alexander's conquest.
His book (second reference below) contains an interesting graph showing the number of known Hellenistic horoscopes distributed by years. (A horoscope is relatively easy to date precisely from the information contained in it). According to this graph, there are none before the year -100, and the sharp maximum falls on the year 100, with sharp decrease by 200, and very sharp decrease around 500, when pagan science (including mathematics and astrology) was formally banned by Justinian.
It is true that most horoscopes are found in Egypt, but this was Hellenistic Egypt, and majority were in written Greek, with some in (demotic) Egyptian.
Sources: A brief but very informative account is O. Neugebauer, The exact sciences in antiquity, Harper torchbooks, 1962. A comprehensive source is O. Neugebauer, A History of Ancient mathematical astronomy, in 3 vols., Springer 1975.
EDIT. I address some comments on my answer. Very few serious scientists would spend their time to study such nonsense as horoscopes. Neugebauer and his collaborators are actually the only scientists whom I know who did this. Surviving Hellenistic astronomy sources are so scarce, that literally everything which came to us from that time was carefully combed for even the smallest hints of relevant information. Perhaps I am missing something, and will be grateful if someone gives a reference to another reliable study. This does not include astrologers themselves, of course:-)
First off, in ancient cultures, astronomy and astrology were virtually the same discipline. There were certain practical aspects to the study of astronomy, particularly the measurement of time and the development of calendar systems, but outside of that, there was little or no abstract, scientific study of astronomy for its own sake:
Only at a relatively late period did the study of astronomy for its own sake begin to develop:
...A particularly important early development was the beginning of mathematical and scientific astronomy... The Babylonians discovered that lunar eclipses recurred in a repeating cycle known as a saros... Following the Babylonians, significant advances in astronomy were made in ancient Greece and the Hellenistic world...
So, if the ancient Egyptians were astronomers, we can be fairly certain they were also astrologers:
The very fascinating discipline of Archaeoastronomy has revealed that the ancient Egyptian temples and monuments were astronomically aligned:
And much more there: Egyptian Astronomy
If so, it's quite clear that the Ancient Egyptians believed that there were intimate connections between their earthly activities and religious practices, and those of the visible heavens, as expressed in these many astronomically aligned structures: Divination based on the premise that there is a relationship between astronomical phenomena and events in the human world.