In a stormy session, Parliament's Constitution Law and Justice committee, dominated by Netanyahu's nationalist-religious ruling coalition, voted in favour of the bill that limits "reasonableness" as a standard of judicial review.
After the committee vote, the shekel weakened by 0.3% against the dollar. The bill still has to pass three readings in parliament to be written into law.
The government's legislative judicial push, unveiled after Netanyahu regained power in late December atop a hard-right coalition, has set off unprecedented protests, stirred concerns for Israel's democratic health and dented the economy.
On Monday, thousands of anti-government protesters converged on Israel's Ben Gurion Airport, some scuffling with police who sought to keep them from blocking access to the terminal for most flights in and out of the country.
Netanyahu doused some of the furore in March by pausing the legislation and holding compromise talks with the opposition. Those negotiations proved fruitless, and he is now pursuing what he deems a scaled-back version of the overhaul. The opposition says the changes remain a danger to democracy.
Netanyahu has defended the reforms as restoring balance between the branches of government and redressing what he and his coalition allies see as judicial overreach. Critics see it as a disastrous bid by Netanyahu to curb court independence even as he argues his innocence in a long-running corruption trial.
(Reporting by Maayan Lubell and Steven Scheer, Editing by William Maclean)
