The suspension of operations at the Libyan embassy in Egypt was accompanied by a request to the Egyptian authorities for better security arrangements, a source told Ahram Online.
"Our people have been attacked repeatedly and we failed to get the Egyptian authorities to provide proper security," a source from the Libyan embassy told Ahram Online by phone.
"We will not resume our operations until we feel secure entering and leaving the embassy."
The suspension comes only a few days after Morsi received the Libyan prime minister, as Egyptian-Libyan relations came under strain after the death of a Coptic Egyptian in Libya.
A few days ago, demonstrators burned a Libyan flag at the embassy's gate to protest the death of the Copt who was imprisoned in Libya.
The Coptic Christian was detained on suspicion that he was spreading Christianity in Muslim Libya.
Egypt's foreign ministry said the man, Ezzat Atallah, likely died of natural causes, but his family alleges he was tortured to death.
Two other detainees, who are among an estimated 50 Egyptian Christians detained in Libya on suspicion of proselytising, told The Associated Press in interviews after their release that they were tortured in a detention centre run by a powerful militia in eastern Libya.
The two said they were rounded up in a market by gunmen who checked their right wrists for tattoos of crosses. They said that during four days of detention they were flogged, forced to take off their clothes in cold weather and stand at 3am outdoors on a floor covered with stones.
Libya's government relies on militias to serve as security forces since its police and military remain in shambles following the 2011 civil war that ousted Muammar Gaddafi from power.
Egypt's foreign ministry said that its embassy in Libya was investigating the allegations of torture.
Hundreds of thousands of Egyptians are working construction and trade jobs in Libya, a Muslim majority nation with few religious minority citizens. Hundreds are believed to have been killed in crossfire during the civil war and many others have lost their jobs.
On Saturday, Egypt's main opposition National Salvation Front issued a statement calling on Egyptian President Mohamed Morsi to do more to address the alleged mistreatment of Egyptian Christians in Libya.
The group condemned the deportation of dozens of Egyptians from Libya in recent weeks, and said that the Islamist president must do more to defend the rights of Egyptian Christians there.
The opposition group accused Morsi, who hails from the Muslim Brotherhood group, of reneging on promises to improve the status of the mostly poor migrant Egyptian workers living abroad.
"The presidency and government moved urgently and sent a high-level delegation to the United Arab Emirates to demand the release of detainees accused of belonging to the Muslim Brotherhood weeks ago, but has neglected to address the situation of Egyptians who have been assaulted in Libya," the opposition group said.