The proposed legislation is perceived to be more repressive than its predecessor from the era of ousted President Hosni Mubarak, Ahram Online reported Friday.
The proposal is scheduled to be passed soon by Egypt's Shura Council, the upper chamber in Parliament.
Activists said the measure would permit undue state interference in the internal workings of Egyptian civil organizations and create new layers of bureaucracy by requiring NGOs to report to various state bodies frequently.
Hafez Abu-Saeda, leader of the Egyptian Organization for Human Rights, said the phrase "discretionary power" is the most troublesome aspect.
"The bill gives administrative, rather than judicial, bodies the right to say what is legal and what is not," Abu-Saeda told Ahram Online.
As written, the bill would allow Egypt's Social Solidarity Ministry to examine every decision issued by the boards of civil society organizations. It also would require Egyptian authorities to approve membership in or cooperation with international NGOs.
"They would even require NGOs to keep visitor logs -- providing details about when meetings are held, the topics discussed and visitors' identities -- to which they would have access," Abu-Saeda told Ahram Online.
Rights activists said they fear "ill-defined principles" in the legislation could be interpreted to clamp down on projects that challenge the practices of Egypt's Muslim Brotherhood-led government.
Critics also said restrictions or bans on foreign funding will put operation of Egyptian human rights groups at risk.