A panel made up of 70% Islamist members that was chosen by the Muslim Brotherhood and their allies to write the new constitution has been suspended by the country's supreme court.
The significance of this ruling is that the constitution will now almost certainly not be written by the time the presidential elections are held in June, which means that the new president will be operating under the old constitiution - a document that grants him near dictatorial powers.
The court ruled that the Islamist-dominated parliament had acted improperly in naming parliamentarians to fill half the 100 seats of the constituent assembly. The Muslim Brotherhood's Freedom and Justice Party (FJP), the largest parliamentary bloc, complained that "politics" had a hand in the judges' decision.
Omar Ashour, an expert on Islamist movements who is a visiting fellow at the Brookings Doha Center, said the court's decision could signal a move by the ruling military council to intervene in the democratic transition. Removing the military from a political role is one of the major challenges Egypt faces in the years ahead.
"That the administrative court would enter into such a political and ideological battle is not a good sign," he said. He noted that there are two court cases pending to dissolve the parliament, a move that could throw the transition into chaos.
Now some new body - its composition and selection process as yet unclear - will be tasked with writing the constitution. Some liberals rejoiced in the court's decision, hoping it would result in a constituent assembly that was more inclusive.
Secular parties had wanted fewer of the members to come from the elected parliament, which is dominated by Islamist parties. In the three-stage election that spanned the end of last year and the beginning of 2012, the FJP and the ultraconservative Nour Party came in first and second, and then worked together to appoint the constituent assembly.
The courts are still dominated by the military so the notion that the generals will be intervening in the democratic process is well founded. Can they manipulate the presidential vote to elect Mubarak's former intel chief General Omar Suleiman? If so, things might become a lot more difficult for the Muslim Brotherhood and their allies.