Egyptian lawmakers presented draft legislation that would label funds for non-governmental organizations public funds and therefore subject to more scrutiny.
U.S. State Department spokeswoman Victoria Nuland said there were serious concerns about freedom of expression in Egypt as a result.
"The draft ... would have a chilling effect on the ability of Egyptian NGOs in the first instance but also international NGOs to support the democratic process in Egypt," she said.
Morsi's administration has been accused of placing too much emphasis on Islamic law. He is from the political wing of Islamist group, the Muslim Brotherhood.
Nuland's concerns follow the censuring of Egyptian satirist Bassem Youssef, who's accused of insulting the president and Islam.
Human rights experts working for the United Nations said Egyptian political trends were evolving in the wrong direction.
"We are seriously concerned that numerous provisions contained in the draft law may be used to hamper the legitimate work of civil society organizations, particularly those advocating human rights," their statement read.
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