The decree was issued by the army-backed interim government before this month's presidential run-off election.
Rights groups, lawyers and politicians challenged the decree, accusing the ruling Supreme Council of the Armed Forces of reviving an unpopular emergency law that ended in May.
The court action comes as Islamist President-elect Mohamed Morsi works on forming what he pledges will be an inclusive government.
On Monday, Morsi moved into the offices of the presidential palace, formerly occupied by ousted president Hosni Mubarak until a popular uprising toppled him last year.
Morsi also met with Egypt's military ruler Field Marshal Hussein Tantawi, whom state television quoted as promising support to the country's "legitimate president-elect."
Morsi is to be sworn in on Saturday.
The ruling military council says he will take the oath of office in front of Egypt's Constitutional Court rather than the lower house of parliament, because of the recent court-ordered dissolution of the assembly. However, Morsi has vowed to assume his post in front of parliament.
It is unclear how much power Egypt's post-revolution presidency will hold. The ruling military council recently gave itself key executive powers and claimed control of legislative affairs after the Muslim Brotherhood-led lower house of parliament was dissolved earlier this month.
Morsi was a senior member of the Muslim Brotherhood before resigning after being declared president-elect. The Brotherhood has rejected the military's actions, raising the prospect of a power struggle.