The move on Tuesday will make it harder for independent candidates to seek the presidency in any elections that might arise before early 2008.
With opposition from about 100 members, including the Muslim Brotherhood group of 88 members, the 454-seat assembly approved an amendment extending the life of the existing local councils until April 2008. They would have expired in April 2006.
Hassan Ibrahim, a member of the Muslim Brotherhood, said the government was worried that the Islamist movement would sweep aside local council members from the ruling National Democratic Party (NDP).
The US State Department said it was opposed in principle to delaying elections and would be discussing the delay with the government.
Sean McCormack, the State Department spokesman, said: "As a matter of principle we do not favour postponing elections."
The government told parliament it needed the two-year period to prepare a new law on local government.
Moufid Shehab, minister of state, quoted by the state news agency MENA, said: "The time left before the term of the local councils expires may not be enough to prepare the new law."
Hosni Mubarak has been Egypt's
president since 1981
But the government's opponents say they suspect the aim may be to give the ruling party more time before the next elections to maintain its dominance of the councils and indirectly its control over who runs for the presidency.
Under a constitutional amendment approved last year, independent candidates for the presidency need endorsements from 65 elected members of the lower house, 25 elected members of the upper house and 140 elected members of local councils.
The Muslim Brotherhood, which the authorities refuse to recognise as a political party, can already meet the first requirement and analysts say it stands a good chance of meeting the third requirement if it contests the local elections. It will have a chance to meet the second requirement in April 2007.
At least until the next parliamentary elections, expected in 2010, none of the existing recognised political parties could meet the tough and complicated conditions, leaving the NDP free to choose a successor to Hosni Mubarak, the president, who has run the country since 1981 and won re-election in September last year.
The Muslim Brotherhood has seen
a rise in popular support
Mohamed Habib, deputy leader of the Brotherhood, said his group had expected the postponement of the local elections.
"The NDP wanted to delay the elections to gather themselves," he said.
"The make-up of the local councils in the current situation ... makes the candidate of the NDP the only player in presidential elections," he said.
Mubarak's 42-year-old son Gamal, who was promoted to the post of NDP assistant secretary-general this month, has denied he has any presidential ambitions.
But political analysts say many signs point to an attempt to arrange a constitutional succession through the ruling party, possibly while the elder Mubarak still controls the country.
A senior NDP official, who asked not to be named, said on Sunday he favoured installing Gamal Mubarak as secretary-general of the ruling party "as soon as possible". The appointment would further strengthen Gamal's position.