Members of the opposition and a number of NGOs argued the move was a continuation of the government’s attempts to erode Israeli democracy.
The petition urged the court to address the lack of women in directors-general roles in Israel's government, following the appointment of 10 men.
The original bill proposal was that the power to elect the watchdog would shift from the judicial selection committee to the Knesset.
Since May 2024, the position of Ombudsman of the Judiciary has remained vacant.
The new proposal also includes a mechanism to prevent a stalemate in high court appointments.
"This is a sad day for democracy and a sad day for our judicial system," the justice minister said in a statement.
The Judicial Selection Committee convenes to appoint Israel's new chief justice.
The bill proposal, by Likud MK Osher Shkalim, is one of a number of proposals targeting Kan, which are being promoted by Communications Minister Shlomo Karhi.
Earlier on Friday, Attorney-General Gali Baharav-Miara penned a letter to Levin, calling on him to convene the committee.
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