The indigenous groups say it could set the stage for privatising some water supplies, robbing local communities of control over their natural resources.
"We have called on our local organisations to join this protest," Marlon Santi, head of the Indigenous Confederation of Ecuador, told reporters outside congress in Quito.
"We are not going to move from here until our concerns are clearly addressed."
The administration of Rafael Correa - which took office in the Andean nation of 14 million people in 2007 with wide indigenous support - says the law is needed to decentralise and better regulate Ecuador's water system.
Congress, where Correa has a majority, tried to calm the situation on Thursday, saying it would "sift through observations and suggestions from all sectors to approve the best law possible".
Correa has also defended the bill calling the protest leaders "liars".
"They do not scare me at all," he said, announcing he would organise a march in favour of the water bill.
"Water belongs to the indigenous people, but also to the mixed-race people. The water belongs to everyone."
Some indigenous groups from outside the capital tried to enter the city on Thursday, witnesses said. But when security forces stopped them, they blocked roads with stones and branches.