Ursua said Smith's transfer after a month in a local jail would violate an order of the appeal court and a suburban Manila court which had ordered his detention in a jail in the capital while he appealed against his conviction.
The government allowed Smith to be transferred to the US embassy on Friday to diffuse tensions with its most important ally, but the plan could backfire on Gloria Arroyo, the president.
Some left-wing politicians said they may seek to impeach Arroyo – which would be a third such attempt, after her congressional allies threw out two bids in the past two years, which alleged Arroyo cheated in the 2004 elections.
Smith's lawyers, the Philippine government and the American embassy petitioned for his transfer to US custody based on the 1998 Visiting Forces Agreement (VFA) signed by Washington and Manila.
The VFA governs the conduct of US troops in the Philippines.
Rule of law
Marius Corpus, the interior secretary, said on Friday after Smith's transfer that Arroyo was "merely complying with international obligations".
But Ursua said on Monday: "You know we all have differing interpretations of the VFA, but in our legal system, in our rule of law, our courts have the final say and under our law, each prisoner is under the jurisdiction of the court.
"Nobody can jail a person and nobody can release a person from detention if there is no court order. That is a very basic rule in our law."
Raul Gonzalez, the justice secretary, brushed aside Ursua's threat of legal action and said that the order for Smith's transfer was not an impeachable offence, the third attempt against Arroyo.