Israel's Supreme Court said on Wednesday it would hear an appeal against a new law that curbs some of its own powers, pitting it against Prime Minister Benjamin Netanyahu's right-wing government that is seeking an overhaul of the judicial system.

A bench decision posted on the court's website said a hearing will be set for the appeal in September. The court did not issue an injunction against the new law, which came into effect on Wednesday.

A political watchdog and Israel's bar association had petitioned the court to intervene.

Critics say the changes could encourage corruption and abuses of power by removing effective oversight on the executive's authority.

The judicial overhaul has caused a deep divide in Israeli society, kindling months of unprecedented protests, stirring concern among allies abroad including top supporter Washington for the health of Israel's 75-year-old democracy, and straining the loyalties of some army reservists.

But it has also seen Arab citizens, who make up a fifth of Israel's population, stay on the sidelines, disillusioned with what they say is systemic discrimination that has left them disproportionately disadvantaged. They say they have no place in the debate over Israel's identity as Jewish and democratic.

Netanyahu has taken a hit in opinion polls.

Surveys by two main Israeli news broadcasters showed that if an election was held now, the number of seats held by his hard-right governing coalition in the 120-seat Knesset (parliament) would fall from 64 to 52 or 53.

Seats held by the 73-year-old premier's Likud party would fall from 32 to 28, according to N12 News, and to as low as 25, according to Reshet 13 in the polls published late on Tuesday.

The nationalist-religious coalition, formed after an election last November, passed legislation on Monday to limit some of the Supreme Court's powers.

It was the first ratification of a bill that is part of changes to the judiciary that Netanyahu says are necessary to balance powers and stop the Supreme Court over-reaching.

Critics say he is threatening Israel's democratic principles and independence of the courts, possibly with an eye to a corruption case he himself is facing. Netanyahu denies that, as well as the charges against him.

The domestic crisis has coincided with a surge of violence in the Israeli-occupied West Bank.

On Wednesday, the Palestinian Health Ministry said a 23-year-old man was shot dead by Israeli forces during confrontations in the West Bank city of Nablus.

The Israeli military said it had captured a Palestinian suspected of "terrorist activity". Soldiers were shot at during the operation and returned fire, hitting one person, it said.

With the shekel falling around 10 percent since the government announced its judicial overhaul in January and pressure mounting on Netanyahu, his opponents are looking to the more moderate wing in his Likud party to dissuade him from pushing more legislation.

"There is a hardcore over there that will follow Netanyahu blindly into any abyss. However there is a critical mass among Likud voters who are displeased with what is happening right now," said political analyst Amotz Asa-El, research fellow at the Shalom Hartman research institute.

President Isaac Herzog, who has tried to mediate a common ground, issued an open letter pleading for unity ahead of a Jewish fast day mourning the destruction of ancient temples in Jerusalem. In it he appeared to placed the onus on Netanyahu.

"As I have emphasized before, greater – even if not sole – responsibility to find solutions that will benefit the state and society as a whole, will always be with those who have the power, and the reins of government in their hands," he said.

In response, coalition chair and lawmaker from Netanyahu's Likud party, Ofir Katz, said Herzog's comments were unfortunate.

"Instead of sending a message of reconciliation and joining the coalition’s calls to resume dialogue, he is pointing an accusing finger at the coalition," said his statement carried by local media.

The United States has lamented the Knesset vote and urged consensus but offered no hint that Netanyahu’s government could face practical consequences, exposing the limits of President Joe Biden’s influence over the long-serving right-wing leader.

The European Union weighed into the debate on Wednesday, calling for a compromise. An EU Commission spokesperson said relations with Israel were based on shared values "where the independent judiciary is an essential element."

Street protests largely subsided by Wednesday as the Knesset approached a long summer recess from July 30. Lawmakers reconvene in mid-October while Netanyahu has set November as a target for consensus with opposition parties for more reforms.

Amid concerns that the crisis may distract Israel from security issues, the military has acknowledged an uptick in requests by reservists to halt service and said that could gradually affect its readiness if the trend persists.

Protest leaders say growing numbers of reservists may abstain from duty.

Israel's enemies have convened top-level meetings to consider the turmoil and how they might capitalise on it, sources familiar with the discussions told Reuters.

As well as violence between Israel and the Palestinians, the domestic furore has coincided with rising friction with Lebanese Shi'ite group Hezbollah, backed by Israel's arch-foe Iran. (Reuters)