Anti-government demonstrations had prompted Netanyahu to suspend his judicial drive in March to allow compromise talks with opposition parties. He declared those talks fruitless last week and ordered some of the legislation to be revived.
The proposed changes, which include curbing on the court's ability to rule against the government, had sparked frequent street protests before the March suspension. On Saturday night anti-overhaul activists blocked a major Tel Aviv highway.
Coalition lawmakers have indicated that the new bill would be a far softer version of previous proposals that had sought to almost totally roll back the Supreme Court's power to rule against the executive.
The opposition, however, says the new bill would still open the door to corruption.
"You are renewing a legislation blitz meant to destroy the justice system's independence and badly hurt Israeli democracy's delicate checks and balances," Labour lawmaker Gilad Kariv said as the debate began.
Opposition leader Yair Lapid on Twitter urged Netanyahu to stop the legislation and revive negotiations "until we reach agreements that will safeguard democracy and prevent a national disaster".
The proposed judicial overhaul has also stirred Western concern over Israel's democratic health and spooked investors. Critics see it as an attempt to curb court independence by Netanyahu, who is on trial on graft charges that he denies.
The coalition says its goal is to balance the powers of the government, legislature and judiciary by reining in a Supreme Court they see as too interventionist.
