The move falls short of a formal ban, but underlines the government's determination to crush the Brotherhood. The authorities accuse the group that won five successive elections since 2011 of terrorism and inciting violence.
But so far they have failed to snuff out nationwide demonstrations demanding the reinstatement of Mr Mursi, ousted by the army on July 3 after mass protests, or stem a rise in militancy, which culminated in an attempt to assassinate the interior minister in Cairo on Thursday.
The Brotherhood, sworn to peaceful protest, condemned the attack but urged its supporters to reject what it calls an army coup against democracy.
Authorities are pursuing the toughest crackdown in decades on the Brotherhood, Egypt's biggest political grouping.
Since July, they have killed more than 900 of Mr Mursi's supporters and arrested most of the movement's leaders, including the deposed president, on charges of murder or inciting violence against anti-Brotherhood protesters.
The symbolic move to cancel its legal status applies to the non-governmental organisation registered by the Brotherhood in March as a defence against legal challenges.
A report in an Egyptian newspaper said the decision would be taken within days, quoting Hany Mahana, spokesman for Social Solidarity Minister Ahmed el-Boraie.
The same official was quoted by the state-run Al-Akhbar newspaper as saying the decision had already been taken.