The high court, whose judges have staunchly backed the leftist president in a power struggle with the legislature, based its decision on an earlier ruling that the opposition majority was in contempt of court.
"As long as the National Assembly's contempt of court and invalidity persist, parliamentary powers shall be exercised directly by (the Supreme Court's) constitutional chamber or by the body it designates to safeguard the rule of law," it said late last night.
The speaker of the National Assembly, Julio Borges, called the decision "rubbish."
"Nicolas Maduro has staged a coup in Venezuela," he said in a fiery speech outside the National Assembly.
He urged the army, which has thus far supported Maduro, to take a stand.
"The Venezuelan armed forces cannot remain silent as the constitution is breached," he said, appealing to soldiers who are also suffering through what he called the "chaos" of the economic crisis.
The opposition Democratic Unity Roundtable (MUD) condemns the fraud charges as a trumped-up bid to curb its power after it won a landslide in legislative elections in December 2015 with a promise to oust Maduro.
The elections forced the president and his allies in the United Socialist Party of Venezuela (PSUV) to share power for the first time since its founder, the late Hugo Chavez, launched Venezuela on the path of leftist "revolution" in 1999.
Since then, the court has overturned every law passed by the legislature.
Venezuelan political analyst Carlos Romero warned that "democracy is in danger" in the country.
"We're talking about an indiscriminate and illegal use of the Supreme Court's powers to do away with the legislative branch," he told AFP.
"To legally overtake the functions of a branch of government is a coup," said Latin America specialist Christopher Sabatini of Columbia University in New York.
The ruling came a day after the Organization of American States (OAS) held a special meeting where 20 countries voiced concern about the situation in Venezuela, drawing a furious reaction from Maduro.
Sabatini said the timing was no coincidence.
"It's a giant middle finger to the OAS," he told AFP. "They're like, 'You know what? Screw you, we're still going to do whatever we want.'"
On Tuesday, the Supreme Court stripped lawmakers of their legislative immunity, clearing the way for them to face prosecution.
Maduro has accused opposition lawmakers of treason for asking the OAS to consider suspending Venezuela for violating democratic norms.
Treason carries a sentence of up to 30 years in Venezuela.
Under the law, the government needs legislative approval to launch joint ventures with private oil companies.
The court ruled that it had no choice but to take over congressional powers, having deemed the National Assembly unable to fulfill its duties.
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