The Maori Council and a Waikato hapu collective have been granted a High Court hearing on Tuesday to challenge the Government's planned sale of Mighty River Power.
They will argue that the Government is acting illegally by selling the shares before defining the Maori interest in fresh water.
Lawyers will ask for a judicial review and an injunction to stop the partial sale of the state-owned electricity company.
A grouping of Waikato sub-tribes, Pouakani, will be part of the court action in Wellington.
Chairman Tamati Cairns says they assume that negotiations with the Crown are over and the only way forward is through the courts.
He says it is very regrettable that legal action is being taken, but fear Maori rights will be extinguished when shares are sold in Mighty River Power.
Mr Cairns says tangata whenua must have propriety rights over water passing through their tribal land.
Meanwhile, the Cabinet on Tuesday will approve an order to remove Mighty River Power from the State Owned Enterprises Act.
A spokesperson for the Government says they are not commenting on the legal challenge as the matter is now before the courts.