The move by the president's party and others prompted the country's top council of judges to suspend participation in a government-backed conference earlier this month. Morsi had sponsored the conference, which was meant to allow judges the chance to draft proposals on how reform the judiciary.
Morsi's allies say Egypt's judiciary is filled with supporters of ousted president Hosni Mubarak, who have worked to undermine the transition to democracy and the Islamists' rise to power.
Many judges agree in principle on the need for reform, but don't want the presidency or the legislature to carry it out. They say Morsi has tried to interfere in their affairs and curb their independence.
On Saturday, opposition lawmakers wore black sashes during the Shura Council session that read: "Illegitimate procedure. Illegitimate law."
The handful of opposition members in the Shura Council shouted "illegitimate" as the speaker of the interim parliament, Ahmed Fahmy, said the law will be debated in principle by the body's Legislative Committee. Fahmy is also a Brotherhood party member.
Dozens of protesters outside the building were led by opposition figure Hamdeen Sabahi, who placed third in the country's nationwide presidential elections last year. They accused the Shura Council itself of being illegitimate, recalling the fact that only 7 percent of the electorate voted for the body, which traditionally does not legislate. Morsi appoints a third of the council's members.
"This law is a clear attack on the judiciary and it's against the constitution," Sabahi told The Associated Press. "There's no one logical or wise reason in the nation's interest to insist on passing this law with such hastiness or even discussing it in the Shura Council."