An Israeli ministerial committee gave initial approval on Sunday to legislation intended to clamp limits on funding by foreign governments for Israeli organisations.
Critics say the measure is aimed mainly at choking off European and other Western aid to left-wing groups. Supporters say such monetary support from abroad is tantamount to foreign interference in internal Israeli politics.
A ministerial panel passed the bill, introduced by members of Prime Minister Benjamin Netanyahu's right-wing Likud party, by a vote of 11 to 5.
Parliament could begin discussing the legislation as early as next week when the full cabinet is due to consider amendments proposed by several ministers, government officials said.
The bill would then need to pass four votes in parliament to become law.
The legislation amends a law governing funding for non-governmental organisations by setting a ceiling of 20,000 shekels ($5,400) a year for the amount another government may contribute each year to any group.
Netanyahu conditionally backs the measure, although it has drawn protests from European diplomats, officials in his office said, adding that he had urged lawmakers to double the funding limit and exempt humanitarian groups from the restrictions.
"He supports that the process move forward but there has to be a full discussion on the wording of the bill, and deliberation on its ramifications. He wants to be cautious," one official said, speaking on condition of anonymity.
"You cannot have a situation where foreign governments actively intervene in internal Israeli politics," the official added, summing up what he said seemed the majority view of Likud cabinet ministers.
In explanatory comments, the Israeli bill says it expressly intended to "bar Israeli organisations from receiving money from foreign governments and international groups such as the United Nations and European Union".
It charges that funding from these countries may "act to incite many organisations operating under the guise of being human rights groups, which try to influence the political discourse, and Israel's character and policy."
While the measure does not specify which Israeli organisations are being targeted, one of its sponsors, Likud lawmaker Ofir Akounis, cited the settlement watch group "Peace Now," human rights group "B'Tselem" and a military watchdog called "Breaking the Silence" as foreign aid recipients.
The measure is one of several condemned as bids to muzzle critics of Israeli policies toward Palestinians who seek a state on land Israel captured in a 1967 war.
Another divisive measure on parliament's agenda seeks to tax heavily contributions to non-governmental groups, while another bill would entrench in law a definition of Israel as a Jewish homeland, a characterisation that has drawn criticism from the country's Arab minority.
"What we have is a bunch of laws in which the majority is trying to exert tyranny over others, and that is what is so dangerous here," left-wing Israeli lawmaker Ilan Gillon said.