Cabinet spokesman Sherif Shawki said that Prime Minister Hazem el-Beblawi, who leads the military-backed government, assigned the Ministry of Social Solidarity to study the legal possibilities of dissolving the group. He didn't elaborate.
The Muslim Brotherhood group, founded in 1928, came to power a year ago when its now ousted Egyptian president Mohammed Morsi was elected in the country's first free presidential elections.
The announcement comes as supporters of Morsi continued defying a state of emergency with a new round of protests Saturday.
Egyptian military units moved in on two sit-in camps where supporters of Mohammed Morsi had been demonstrating Wednesday. The clashes killed more than 600 people that day and sparked protests and violence.
On Thursday, Morsi supporters set fire to a government building in the Egyptian city of Giza.
Mass marches across Egypt turned into fierce battles with more than 170 people killed and 1,330 people wounded Friday after the Muslim Brotherhood declared it a "Day of Rage."
Witnesses say Egyptian security forces stormed a mosque in Cairo where hundreds of Morsi supporters had barricaded themselves overnight.
Police tossed tear gas into the mosque after reportedly being fired on by someone inside.
Egypt's Interior Ministry said in a statement that a total of 1,004 Brotherhood members were detained in raids across the country Friday and that weapons, bombs and ammunition were confiscated with the detainees.
ABC News and The Associated Press contributed to this report.