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. 

As Morsi takes symbolic oath, many fear the 'Islamization of Egyptian society

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.

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.

As Morsi takes symbolic oath, many fear the 'Islamization of Egyptian society'

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.

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.

Early vote
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.

Post-revolution Egyptians to US: Stay out

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. 

More world news from msnbc.com and NBC News:

• 6 NATO troops killed by roadside bomb in Afghanistan
• US, Afghan officials condemn public execution of Afghan woman
• Tens of thousands protest in Mexico City against president-elect
• UK detains terror suspect who traveled close to Olympic Park
• Dozens killed as torrential rains, floods hit southern Russia

Follow World News on msnbc.com on Twitter and Facebook

Khalil Hamra / AP

Protesters help a wounded man during clashes with security forces near the Interior Ministry in downtown Cairo on Friday.

Updated at 10:05 a.m. ET: CAIRO -- The Associated Press is reporting that police in Cairo fired salvos of tear gas and birdshot at rock-throwing protesters as popular anger over a deadly soccer riot spilled over into a second day of street violence that left three people dead and more than 1,500 injured, doctors and health officials said.

The protesters blame the police for failing to prevent the melee after a soccer match in the Mediterranean city of Port Said on Wednesday killed 74 people. The violence — the soccer world's worst in 15 years — has fueled anger at Egypt's ruling military generals and the already widely distrusted police force.

"I came down because what happened in Port Said was a political plan from the military to say it's either them or chaos,"  19-year-old Islam Muharram told The Associated Press.

NBC: Two Americans kidnapped in Egypt released

Demonstrators in Cairo, the city of Suez and several Nile Delta cities on Friday turned their anger on the military, calling for it to surrender power because of what they say is the ruling generals' mismanagement of the country's transition to democracy.

In the capital, protesters in helmets and gas masks hurled stones at riot police firing tear gas outside the Interior Ministry, which controls the police. The demonstrators say they don't want to storm the ministry, but to hold a sit-in in front of it to protest the soccer deaths.

More photos: Street battle rages near Egypt's Interior Ministry

Many protesters have suggested the authorities either instigated the Port Said violence or intentionally allowed it to happen to retaliate for the key role soccer fans known as Ultras had in clashes with security forces during the uprising that toppled President Hosni Mubarak.

The Cairo violence began late Thursday and escalated overnight, with protesters pushing through the barricades erected around the fortress-like ministry building and bringing down a wall of concrete blocks erected outside the ministry two months ago, after similar violence left more than 40 protesters dead.

The death toll from Friday's violence stood at three.

Original post: Protesters laid siege to Egypt's Interior Ministry on Friday, pushing their protest against the military-led government into a second day in a show of anger triggered by the deaths of 74 people in the country's worst soccer disaster.

One person died in Cairo from a shotgun pellet wound and two were killed in the city of Suez as police used live rounds to hold back crowds trying to break into a police station, witnesses and the ambulance authority said.

The demonstrations erupted following the deaths at a soccer stadium in Port Said. Most of those killed were crushed to death in a stampede but protesters hold the military-led authorities responsible.

Story: 2 dead, 600 hurt in protests after soccer riot

Several thousand protesters threw rocks towards the ministry building in central Cairo through the night. Security forces fired tear gas but the protesters continually regrouped.

Of the few vehicles in the usually congested downtown area, most were ambulances that ferried casualties from the clashes.

By Friday morning, a hard core of demonstrators had heaved aside a concrete barrier blocking a main road near the ministry to take closer aim at the building. A Reuters witness heard firing and found gun pellets on the ground.

"We will stay until we get our rights. Did you see what happened in Port Said?" said 22-year-old Abu Hanafy, who arrived from work on Thursday evening and decided to join the protest.

PhotoBlog: Chaotic scenes as injured soccer fans return to Cairo

Revolutionary youth groups were calling for a mass weekend protest named the "Friday of Anger." By late morning, a few hundred people had joined protesters who slept overnight in Cairo's central Tahrir Square.

Ambulances had to intervene overnight to extract riot police whose truck took a wrong turn into a street full of protesters.

Protesters surrounded the vehicle for at least 45 minutes, rocking it while the police were inside. Some of the demonstrators then formed a human corridor to help them escape.

Close to 400 people have been hurt in the confrontations that erupted late on Thursday, the health ministry said, many of them suffering from inhaling tear gas fired by riot police who the Interior Ministry said were protecting the building.

Story: 'People are dying in front of us': Scores killed in riots after Egypt soccer match

 In Suez, witnesses said fighting broke out at a local police station in the early hours of Friday. "We received two corpses of protesters shot dead by live ammunition," said a doctor at a morgue where the bodies were kept.

A witness said: "Protesters are trying to break into the Suez police station and police are now firing live ammunition."

The soccer stadium deaths have heaped new criticism on the military council, which has governed Egypt since Mubarak stepped down a year ago in the face of mass protests. Critics regard them as part of his administration and an obstacle to change.

The army leadership, in turn, has presented itself as the guardian of the "January 25 revolution." It has promised to hand power to an elected president by the end of June.

Reuters and The Associated Press contributed to this report.

More from msnbc.com and NBC News:

• Ex-Khmer Rouge prison chief gets life in prison
• Panetta report fuels concerns that Israel will attack Iran
• 2 dead, 600 hurt in protests after soccer riots
• White House: No decision yet on end to combat in Afghanistan
• London landlords evict tenants to gouge tourists?
• Defiant Chinese village takes steps toward democracy