Egyptian President Abdul Fattah al-Sisi has authorised the military to protect state facilities after jihadists killed more than 30 soldiers last week.
A spokesman said the new law aimed to protect facilities such as power plants, gas pipelines, and oil fields.
Critics say it is a sign of the army's expanding role amid fears of a return of military trials for civilians.
President Sisi declared a three-month state of emergency after the bomb attack in Sinai on Friday.
Supporters say the new decree will allow the military to work in co-operation with the police to protect key buildings and infrastructure for the next two years.
The decree also allows the military to try suspects involved in acts against state facilities.
But activists say the new law is too broadly defined.
They say it includes bridges and roads and could also cover universities, leading to the return of soldiers on the streets and the possibility of civilians being tried in military courts.
Putting an end to military trials was one of the main aims of the 2011 uprising that ousted the former president, Hosni Mubarak, says the BBC's Orla Guerin in Cairo.
Presidential spokesman Alaa Youssef insisted the decree was aimed at tackling terrorism, not protesters, and told the BBC it was a limited, proportional response to recent attacks by militants.
Activists arrestedMeanwhile, an Egyptian judge ordered 21 activists to be arrested on Monday at the start of their retrial for breaking protest laws during the military's overthrow of President Mohamed Morsi in 2013.
The activists, who had been released on bail last month, chanted "down with military rule" after the judge read out his decision in court.
The court also issued arrest warrants for four of the defendants who did not show up.
The group, which includes leading campaigner Alaa Abdel Fattah, were sentenced to 15 years in prison in absentia last June for violating a 2013 law curbing the right to public protests.
They were later arrested and tried again in person on the same charges but that trial collapsed last month when the presiding judge stepped down.
On Sunday, Mr Abdel Fattah's younger sister Sanaa, a 20-year-old student, was jailed for three years along with 23 other young activists for breaking protest laws.
Outside the courtroom on Monday, Mr Abdel Fattah said the rulings against activists like his sister were a deliberate attempt by the government to imprison and silence their critics.
The judge set the next hearing for Mr Abdel Fattah and the 20 other activists for 11 November.
Egypt gives new powers to military
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