Mohamed Abd El Ghany / Reuters
Supporters of Egypt's Mohamed Morsi cheer with a sign that reads "All of us with your right decision President Morsi" in Tahrir Square in Cairo on Monday.
Updated at 1055 a.m. ET: Egypt's highest court insisted Monday that its ruling that led to the dissolution of the Islamist-dominated parliament was final and binding, setting up a showdown with the country's newly elected president.
The court, which ruled on June 14 that the Islamist-led parliament had been elected based on unconstitutional rules, also said it would review appeals challenging the constitutionality of President Mohammed Morsi's decree.
"We will hear these cases tomorrow (Tuesday)," the court's head, Maher el-Beheiry, told Reuters.
The announcement on state TV came a day after Morsi recalled the legislators, defying the powerful military's decision to dismiss parliament after the Supreme Constitutional Court ruled that a third of its members had been elected illegally.
However, both sides appeared together Monday at a military graduation ceremony. Morsi sat between the head of the armed forces Field Marshal Hussein Tantawi and Chief-of-Staff Sami Anan. The three sat grim faced for most of the ceremony, but Tantawi and Morsi exchanged a few words while seated on the reviewing stand.
The court's judges made the decision in an emergency meeting even as the speaker of the dissolved legislature, Saad el-Katatni, called for parliament's lower chamber, the People's Assembly, to convene on Tuesday. The court's ruling did not cover parliament's upper chamber, known as the Shura Council, which is largely toothless.
Both Morsi and el-Katatni are longtime members of the Muslim Brotherhood, which has long been at odds with the military and with other Islamists.
Mohammed Morsi officially became the president of Egypt on Saturday, as a new era of government takes shape. NBC's Kate Snow reports.
The military had been running Egypt since Hosni Mubarak was ousted last year. But, shortly before the handover to the elected president, the army put some curbs on the presidency and gave itself legislative powers.
After a little more than a week in office, Morsi's move highlights the power struggle likely to define his term, pitting long repressed Islamists against generals used to calling the shots and an establishment full of Mubarak-era officials.
Fresh legal wrangle
Morsi's move also threatens a fresh legal wrangle over whether Morsi can overrule a decision by the Supreme Constitutional Court to dissolve parliament, creating more uncertainty at a time when the economy is creaking after 17 months of political turmoil.
"President Mohamed Morsi ordered the reconvening of the elected parliament to hold sessions," according to a presidential statement read out by Morsi's aide Yasser Ali.
This was a significant move on the part of Morsi and the Brotherhood, according to Dr. Omar Ashour, a scholar at the Brookings Doha Center and director of the Middle East Politics Graduate Studies Program at the University of Exeter.
"This may end being a game of 'chicken' (to see) who withdraws his decision first," he said in a comment emailed to msnbc.com.
Analysts said they had not expected an easy relationship between the army and the Islamist president, but most believed Morsi would tread cautiously to avoid any swift escalation. The Brotherhood has repeatedly said it does not want confrontation.
"This is an early conflict. Everyone was expecting this to happen but not now, unless this decision was taken in agreement with the army council, but I doubt this," political analyst Mohamed Khalil said.
Journalists Mona Eltahawy and Ethar El-Katatney provide updates on the developments in Egypt where newly elected president Mohammed Morsi has assumed power over the country.
Morsi's decree was announced shortly after he received his first official U.S. visitor in the presidential palace, Deputy Secretary of State William Burns, whose country gives $1.3 billion of aid to Egypt's military every year.
Burns praised Egypt's progress but said there was more to be done. "It will be critical to see a democratically elected parliament in place and an inclusive process to draft a new constitution that upholds universal rights," Burns said after meeting Morsi and before the decree was issued.
After a call for a show of support by the Brotherhood's Freedom and Justice Party, with the biggest bloc in parliament, a few hundred people gathered in Cairo's Tahrir Square. "We love you Morsi," they chanted, along with "Down with military rule."
Morsi has resigned from both the Brotherhood and its party.
In his decree, Morsi called for an early parliamentary election for a new assembly within 60 days of the nation approving a new constitution, which has still to be drafted.
That suggested a possible attempt at compromise by indicating the assembly, criticized by some for a poor initial performance and dissolved by court order just months after it was elected, would not serve a full four-year term.
"The military wanted to dissolve parliament and the Brotherhood doesn't. There has to be somewhere they can meet in the middle or there will be an indefinite stand-off," said Shadi Hamid of the Brookings Doha Center.
"This could be a compromise arrangement for the short term, so the military gets part of what it wanted - a new parliament in coming months - and Islamists can avoid a situation where the military dominates a legislative authority," he said.
The Supreme Constitutional Court called an emergency session on Monday to review the Morsi's move, the court's deputy Maher Sami told the state news agency MENA, signaling there could be a prolonged legal wrangle.
Reuters and The Associated Press contributed to this report.
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