Al-Sourani sent a letter to Palestinian President Mahmoud Abbas on Thursday saying he could not continue in his post unless the law, ratified by Abbas on Tuesday and which gives ministers the power to appoint judges, was rescinded.
Under the old law, new judges were appointed to the bench by presidential decree after being nominated by a panel of nine senior judges.
Al-Sourani, whose retirement is due on 25 December, asked Abbas to accept his immediate early retirement in protest of the law which he said was "worse than ever".
It is the second time since August that al-Sourani has threatened to quit. On the previous occasion, dozens of jurists went on strike outside the main court building in Gaza demanding a crackdown on violence and improved courtroom security.
"As long as I am in my job I will not allow assaults on the authority of judges and the judicial system in Palestine," al-Sourani said on Thursday.
Al-Sourani said he and other judges would seek a constitutional avenue through the courts to halt the implementation of the new law which, he said, would put the judiciary under the control and the intervention of politicians.
"The new law has torn the independence of the judicial system to pieces"
Palestinian Chief Justice
"The new law has torn the independence of the judicial system to pieces," al-Sourani said.
"The old law was better and we urged it to be developed and improved but we got a worse one. The new law is bad, bad, bad," he added.
"President Abbas has always promised to improve the judicial system and to reinforce its independence and, therefore, the new law should not be implemented because it will fail to achieve both the president's goal and ours," al-Sourani said.
Abbas's legal adviser said the new law aimed to solidify the foundations for a developed judicial system and to boost the
independence of judges.
Palestinian and human-rights organisations have long complained about the intervention by officials and security services in the work of judges in Gaza and the West Bank.
Al-Sourani was a target of the security chaos in Gaza two months ago when unknown attackers detonated explosive devices outside his house and that of Attorney-General Hussein Abu Asi. They were unharmed. No reason was given for the attacks.