A royal decree issued late on Saturday effectively shifted influence from the cabinet to Shura members - an unelected "parliament" whose members are hand-picked by the king. It also made it easier for the council to propose new laws.
The announcement follows last month's decision to hold municipal elections in 2004 in the conservative Muslim kingdom and comes as Saudi Arabia battles a wave of bombings linked to dissident Islamist groups which have killed over 50 people this year.
Shura members denied the steps came in response to the violence, blamed on al-Qaida members trying to topple the rulers of the world's biggest oil exporter, and said they were part of a gradual and tentative process of political reform.
"This decree will solidify the legislative power in the hands of the Shura council," said Shura member Ihsan Bu-Hulaiga. "It will give us more authority."
Critics of the Saudi regime charge that the reform is meaningless as the king retains the right to dismiss any Shura member who defies his will.
London-based Saudi dissident Muhammad al-Massari told Aljazeera.net, "They are appointees - it will be like the king approving something and sending it back to himself. The Shura council members are irrelevant unless they are elected.
"The question is not whether the Shura council is very wise, but rather can the general public accept it - is it the will of the people?" he added.
Calls for reform
Saudi Arabia has faced calls for political and religious reform from dissidents in exile and Western critics since the September 11, 2001 attacks in the United States, which were carried out by mainly Saudi hijackers.
The regime also faces domestic pressure fuelled by a rapid population growth and rising unemployment. Earlier this month, the kingdom witnessed rare pro-reform protests, which were confronted by police.
The 120-strong council plays a largely consultative role but has become more active in the decade since its inception. Members say the government has accepted most of its recommendations.
In January it flexed its muscles by rejecting finance ministry plans to introduce income tax for Saudi Arabia's large expatriate workforce. The plans were shelved.
"It's a step in the right direction. It means we can comment on their comment"
Abd al-Aziz al-Orayer,
The latest changes allow the Shura council to propose new laws or amendments without seeking permission first from the monarch.
They also mean that when cabinet and Shura disagree on an issue, the cabinet will refer it back to the Shura for comment rather than send it straight to the king to decide.
"It's a step in the right direction," said Abd al-Aziz al-Orayer, a member of the council's economics committee. "It means we can comment on their comment."
But he said it still fell short of the council's ambitions, which include vetting the state budget and holding the executive to greater account. "We still have to ask permission to get the ministers to appear before us," he said.