Libya's transitional government will resign unless it is granted greater powers by the General National Congress, a spokesman for the assembly said on Tuesday.
The weak central government has struggled to impose order following the 2011 uprising that toppled Moamer Kadhafi and left much of the country under the de facto control of former rebels turned militiamen.
Last month the GNC ousted prime minister Ali Zeidan after the military failed to prevent rebels from sending a tanker loaded with oil out from a port they have blockaded.
The ship was later captured by US forces and returned to Tripoli.
Zeidan was temporarily replaced by former defence minister Abdullah al-Thani, whose government's mandate is renewable every two weeks until a permanent replacement can be appointed.
"The government refuses to continue as a cabinet in charge of day-to-day affairs with limited powers," and may resign, GNC spokesman Omar Hmidan said, quoted by the official Lana news agency.
"The GNC is examining the demands of the government."
Government spokesman Ahmed Lamin confirmed the cabinet had requested wider powers but denied it had threatened to resign.