A reformist deputy told journalists on Sunday that the Council still had the power to ban hundreds of liberal candidates from standing for parliamentary elections next month.
Reza Yusefian said: "This indicates that the level of confrontation between the MPs and the Guardian Council continues and they [the council] don't want to accept any solution."
Earlier on Sunday, Iranian parliamentary deputies voted to change electoral law - in a clear act of defiance of the conservative watchdog.
The proposed reform said candidates given the green light in previous elections could not be blocked unless a full legal justification was submitted.
This would have saved the candidacies of many disqualified deputies.
To date, the Guardian Council has barred nearly half of the 8200 aspiring candidates from the 20 February poll, mainly allies of reformist President Muhammad Khatami - including 80 of the standing 290 members of parliament.
Dozens of top government officials have threatened to resign unless the Guardian Council overturned the bans. Several reformist political parties have said they may boycott the election.
But the council ruled that the bill was "contrary to Islam and certain articles of the constitution" of Iran according to the Yas-e No daily newspaper - in its edition due to appear on Monday.
"This indicates that the level of confrontation between the MPs and the Guardian Council continues and they [the council] don't want to accept any solution"
Supreme leader Ayat Allah Ali Khamenei had moved to calm the crisis by ordering the council to be less stringent in its vetting procedure, but only some 300 of the rejected candidates have so far been reinstated.
Council members, who are directly or indirectly appointed by Khamenei, have been accused of seeking to rig the polls in order to oust reformers from parliament.
The body, which has defended its vetting process and insisted it is only exercising the laws of the country, has until 30 January to certify the final list of candidates to the interior ministry.
That gives those finally approved only three weeks to pitch their views to an electorate already widely disillusioned, particularly voters who have supported Khatami and the reformists in the past.