Some three months since taking office, Netanyahu's nationalist-religious coalition has been plunged into crisis over the bitter divisions exposed by its flagship judicial overhaul plans.

"State security cannot be a card in the political game. Netanyahu crossed a red line tonight," opposition leaders Yair Lapid and Benny Gantz said in a joint statement.

They called on members of Netanyahu's Likud party not to have a hand in "the crushing of national security."

In announcing Gallant's dismissal, Netanyahu's office did not name a replacement nor give any other details. "Prime Minister Benjamin Netanyahu has decided this evening to dismiss Defence Minister Yoav Gallant," it said.

Shortly afterward, Gallant, 64, wrote on Twitter: "The state of Israel's security has always been and will always be my life's mission."

Netanyahu made the decision to sack Gallant after the former navy admiral warned on Saturday that the overhaul plans risked "a clear, immediate and tangible threat to the security of the state" and called for them to be halted.

"At this time, for the sake of our country, I am willing to take any risk and pay any price," Gallant said in his televised address.

Netanyahu acted in response on Sunday night as he was poised to ratify a central part of the overhaul package, a bill that would tighten political control over judicial appointments, handing the executive wider freedom to name judges to the Supreme Court.

Earlier this month, President Isaac Herzog, the head of state who is supposed to remain above politics, warned that the country faced "disaster" unless a broader consensus could be reached on how to overhaul the judiciary.

But Netanyahu, on trial on corruption charges which he denies, has vowed to continue with a project he says is needed to rein in activist judges and restore the proper balance between an elected government and the judiciary.

As protesters poured into the streets, police used water cannons to push them back from Netanyahu's residence in Jerusalem, while in Tel Aviv, where hundreds of thousands have taken to the streets since the beginning of the year, protesters lighted a large bonfire on a main highway.

The crisis came as Israel's security establishment has been bracing for potential violence in the coming weeks as the Muslim holy month of Ramadan overlaps with the Jewish Passover and the Christian Easter celebration.

Over the past year, Israeli forces have been conducting nearly daily raids in the occupied West Bank, killing more than 250 Palestinian fighters and civilians, while more than 40 Israelis and foreigners have been killed by Palestinian attackers.

Gallant on Saturday became the most senior member of Netanyahu's right-wing Likud party to say he would not support the judicial overhaul, saying protests that have included growing numbers of military reservists were also affecting regular forces and undermining national security.

In recent weeks senior Finance Ministry officials have warned of an economic backlash and business leaders have sounded the alarm for their companies' future.

Adding to the pressure, the head of the Histadrut labour federation, the umbrella organisation for hundreds of thousands of public sector workers, said he was "astonished" by Gallant's removal and promised a "dramatic" announcement on Monday.

Israel's consul-general in New York said he was resigning over the dismissal.

Some of Netanyahu's hard-right coalition partners had called for Gallant to be sacked, but a number of other Likud lawmakers have backed his call for a halt to the reforms.

A key bill effectively giving Netanyahu's religious-nationalist coalition more control over the appointment of judges is expected to be brought for ratification this week in the Knesset, where he and his allies wield 64 out of 120 seats.

But how - or even whether - that as yet-unscheduled vote will proceed has been thrown into question by Likud dissenters and any potential backlash from Gallant's removal.