Prime Minister Benjamin Netanyahu has temporarily halted the passage of the NGO funding law following the opposition of Attorney General Yehuda Weinstein.
In a rare intervention, Mr Weinstein wrote to the Prime Minister last week saying that the new law was "unconstitutional" and therefore would be "indefensible in the Supreme Court". The Attorney General made it clear that this would be his position both in the Court and in the Knesset.
The law, which was proposed by members of Likud and Yisrael Beiteinu, forbids left-wing NGOs from accepting funding from foreign governments and passed its first reading in the Knesset last month.
However, following intense criticism from within Israel and governments in the West, including Foreign Secretary William Hague, Mr Netanyahu planned to revise some of the clauses.