Netanyahu’s coalition, a collection of ultranationalist and ultrareligious lawmakers, unveiled the overhaul earlier this year, saying it was necessary to rein in an unelected judiciary they believe wields too much power.
Critics say the plan, which would weaken the Supreme Court, is a profound threat to Israeli democracy and that it would concentrate power in the hands of Netanyahu and his allies.
They say the court is a key counterweight on majority rule in a country with an otherwise weak system of checks and balances, just one house of parliament where the governing coalition is headed by the prime minister.
The country's president has largely ceremonial powers, and there is no firm, written constitution.
The case that opened Tuesday focuses on the first law passed by parliament in July, a measure that cancels the court’s ability to strike down government moves it deems to be “unreasonable.”
Judges have used the legal standard in rare cases to prevent government decisions or appointments viewed as unsound or corrupt.
The hearing puts Israel’s Supreme Court in the unprecedented position of deciding whether to accept limits on its own powers.
In a sign of the case’s significance, all 15 justices are hearing the appeal together for the first time in the country’s history, rather than the typical smaller panels. The proceedings were also livestreamed and aired on the country's main TV stations.
A ruling is not expected for weeks or even months, but the session Tuesday could hint at the court’s direction. The marathon hearing was largely businesslike, though at times the arguments became tense and heated.
In one exchange, Simcha Rothman, a senior government lawmaker who has shepherded the overhaul through parliament, insisted the court could not be trusted to decide its own fate.
“Can you be the ones to judge this without fear, without prejudice, without bias? Because you are dealing with your own honor and status,” Rothman told the chief justice. “And you talk about the Knesset's conflict of interest?"
Supreme Court Chief Justice Esther Hayut chided him, responding that the court does not deal with its own status but rather "the essential interests of the public.”
In another exchange, Justice Isaac Amit challenged a lawyer representing Netanhayu's coalition who said the new law doesn't endanger democracy.
“Democracy doesn’t die from few strong blows. Democracy dies in series of small steps,” said Amit, who is expected to succeed Hayut as chief justice after she retires later this year.
Netanyahu has not said whether he would respect a decision by the court to strike down the new law. Some members of his coalition have hinted that the government could ignore the court’s decision.
Legal experts warn that could spark a constitutional crisis, where citizens and the country’s security forces are left to decide whose orders to follow, the parliament’s or the court’s.
The political survival of Netanyahu, who returned to power late last year while standing trial on bribery, fraud and breach of trust charges, is also bound up with the overhaul.
His hard-line, religiously conservative coalition partners have threatened to rebel if he doesn't see the legislation through, and critics say Netanyahu could use the overhaul to get the charges against him dismissed.
The plan has infuriated people across many segments of Israeli society. Hundreds of thousands poured into the streets in repeated mass protests for the past 36 weeks.
“We stand here today with millions of citizens to stop the government coup,” said Eliad Shraga, chairman of the Movement for Quality Government in Israel, one of the groups that asked the court to strike down the new law. “Together we will preserve Israeli democracy.”
But it has also exposed an enormous gulf in Israel.
Opponents of the plan come largely from the country’s secular middle class. Leading high-tech business figures have threatened to relocate.
Perhaps most dramatic, thousands of military reservists have broken with the government and declared their refusal to report for duty over the plan.
Netanyahu’s supporters tend to be poorer, more religious and live in West Bank settlements or outlying rural areas.
Many are working-class Mizrahi Jews, with roots in Middle Eastern countries, and have expressed hostility toward what they say is an elitist, secular class of Ashkenazi, or European, Jews.
As the hearing got underway, a couple dozen right-wing activists came out to protest at the entrance to the Supreme Court. “The people are the sovereign!” they shouted through megaphones, blowing horns and holding signs declaring that they had voted for Netanyahu, not Justice Hayut.
The night before, tens of thousands of anti-government protesters rallying against the judicial overhaul flooded the streets near the court, waving national flags and chanting for democracy.
The law under review was passed as an amendment to what in Israel is known as a “Basic Law,” a special piece of legislation that serves as a sort of constitution. The court has never struck down a “Basic Law” before but says it has the right to do so. The government says it does not.
Justice Minister Yariv Levin, the chief architect of the overhaul, said the court “lacks all authority” to review the law.
“It is a fatal blow to democracy and the status of the Knesset,” he said. He insisted lawmakers elected by the people should have the final say over such legislation.
While the attorney general would typically represent the government in such a hearing, Attorney General Gali Baharav-Miara has expressed staunch opposition to the overhaul. The bill's sponsors instead used outside counsel.
The case is at the heart of a wider contest in Israel between fundamentally different interpretations of democracy.
Netanyahu and his coalition say that as elected representatives, they have a democratic mandate to govern without being hobbled by the court, which they portray as a bastion of the left-leaning elite.
Opponents say that if the court's power to review and overturn some government decisions is removed, Netanyahu’s government could appoint convicted cronies to Cabinet posts, roll back rights for women and minorities, and annex the occupied West Bank.