Israeli prime minister Benjamin Netanyahu has fired a key Cabinet ally, heeding a Supreme Court ruling ordering him to do so and deepening a rift over the power of the courts.

Mr Netanyahu announced he was firing interior and health minister Aryeh Deri, at a meeting of his Cabinet. Israel’s supreme court decided last week that Mr Deri could not serve as a Cabinet minister because of a conviction last year over tax offences.

The court ruling came as Israel is mired in a dispute over the power of the judiciary.

Mr Netanyahu’s far-right government wants to weaken the Supreme Court, limit judicial oversight and grant more power to politicians.

Critics say the move upends the country’s system of checks and balances and imperils Israel’s democratic fundamentals.

According to his office, Mr Netanyahu told Mr Deri he was removing him from his post with “a heavy heart and great sorrow”.

“This unfortunate decision ignores the people’s will,” Mr Netanyahu told Mr Deri. “I intend to find any legal way for you to continue to contribute to the state of Israel.”

Mr Deri said he would continue to lead his party and assist the government in advancing its agenda, including the legal overhaul.

Mr Deri’s firing is also expected to shake Mr Netanyahu’s governing coalition, a union buoyed by ultranationalist and ultra-Orthodox parties, including Mr Deri’s Shas, the third largest party in the government.

While some Shas lawmakers threatened to leave the fledgling coalition in the aftermath of the court ruling, it is expected to survive Mr Deri’s absence and attempt to craft legislation that would pave the way for his swift return.

Mr Netanyahu is now expected to appoint other Shas members to replace Mr Deri, at least temporarily.

Mr Netanyahu’s government, the most right-wing in Israeli history, has made overhauling the country’s judiciary a centrepiece of its agenda. It says a power imbalance has given judges and government legal advisers too much sway over lawmaking and governance.

The plan has drawn fierce criticism from top legal officials, the chief justice of the Supreme Court, former lawmakers and tens of thousands of Israelis who have come out repeatedly to protest against the overhaul.

Tens of thousands of Israelis were out again on the streets of Tel Aviv on Saturday night, with some sources putting the figure at 100,000 people.

This followed another demonstration last week that also drew tens of thousands in an early challenge to Mr Netanyahu and his government.

Protesters filled the streets of the city in the latest demonstration, raising Israeli flags and banners that read “The Supreme Court” and “Israel, We Have A Problem”.

Opposition leader and former prime minister Yair Lapid was among them. He said: “This is a protest to defend the country. People came here today to protect their democracy.”

Other protests took place in the cities of Jerusalem, Haifa and Beersheba.

Mr Deri has faced legal problems in the past. He was sentenced to three years in prison for bribery, fraud and breach of trust in 2000 during a stint as interior minister in the 1990s. He served 22 months in prison but made a political comeback and retook the reins of Shas in 2013.