The Cairo Court of Urgent Matters on Sunday ruled that a judicial decision to block the transfer of two strategic Red Sea Islands to Saudi Arabia was null and void.
In January, the High Administrative Court ruled to halt the handover of the uninhabited islands of Tiran and Sanafir to Riyadh.
Ashraf Farahat, the lawyer who filed the latest lawsuit, said the Urgent Matters Court ruled "in favour of disregarding the ruling of the High Administrative Court because the judiciary does not have the authority to interfere with matters of sovereignty," Al-Jazeera reported.
Sunday's decision is subject to appeal and any final agreement between the two countries must be approved by the Egyptian parliament.
In April 2016, Egypt and Saudi Arabia signed an agreement transferring the islands of Tiran and Sanafir to Saudi Arabia. The agreement provoked extensive criticism against the Egyptian government and resulted in street protests against the decision.
The Cairo government explained, in a statement, that the two islands belonged to Saudi Arabia but were only under Egyptian control because Riyadh had asked Cairo in 1950 to protect them.