A statue of Sekhemka valued at £2m was gifted to Northampton's museums by the 4th Marquis of Northampton in 1880.
The Conservative-run council plans to sell it and use the money for heritage schemes but this has been challenged by the Liberal Democrat group.
The ruling party said it could not comment during legal talks.
The sale was earlier challenged by Lord Northampton, a descendant of the marquis, who said the council did not have the right to sell Sekhemka.
The 30in (76cm) limestone figure of a court official clutching beer, bread and cake - items for the afterlife - is believed to have been acquired by Spencer Compton, the second Marquis of Northampton during a trip to Egypt in 1850.
It was presented to the museum by his son some years later.
The council said the statue's value made it too expensive to insure and secure, and its sale could benefit other local heritage and cultural projects.
The Liberal Democrats said the sale should be stopped and the statue ought to remain in Northampton.
Council leader David Mackintosh said: "We have made the decision to auction the statue and reinvest the money into our towns culture and heritage.
"Our legal team are in contact with Lord Northampton, and it would be inappropriate to comment further."
The issue will be discussed at a forthcoming meeting of the council.

The 20-year-old centre-back made 12 appearances this season as Pompey won the League Two title, and has played 50 games in total for the club.
Whatmough said: "In the past few years I've seen a lot of hard times as the club struggled and slid downwards through the leagues.
"But now we are on the way back up again and it's great to be involved and play a part in that."
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Tanks were seen on the streets and explosions could be heard throughout the day in Libya's second-biggest city.
General Khalifa Haftar, who accuses the government of supporting terrorism, began an assault against Islamist fighters in the city last month.
The government in Tripoli says Gen Haftar has no authority to act, but several army units have joined him.
The BBC's Rana Jawad in Tripoli says a battalion within one of the biggest rival militias has also defected to join the general.
The clashes on Sunday were said to have been some of the worst since Gen Haftar began his offensive against Islamists, dubbed "Operation Dignity," in May.
Residents told the BBC that explosions could be heard across the city intermittently for several hours.
An electricity plant was also hit by rockets, causing power outages in large parts of Benghazi.
Many residents who live in the area where the fighting erupted fled their homes to stay with relatives or friends in quieter neighbourhoods.
The number of casualties remains unclear but doctors in the city said at least six people had been killed and a dozen more injured.
A spokesman for Gen Haftar's force told local media that they had seized several senior Islamists as part of their offensive, but this could not be independently verified.
Since launching his offensive, Gen Haftar has rallied support from the public and members of the security forces.
He survived an assassination attempt earlier in June after a suicide bomb attack on his home in the town of Abyar, about 60km (37 miles) east of Benghazi.
Libya is still in turmoil three years after the fall of Muammar Gaddafi, with political, religious and political factions locked in disagreement about the country's future.
Profile: General Khalifa Haftar
Opposition parties on Northampton Borough Council have asked for greater clarity on its plans to sell a 4,000-year-old Egyptian statue.
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Portsmouth defender Jack Whatmough has signed a new two-year contract.
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Fresh clashes broke out in Benghazi on Sunday after a rogue general launched a fresh assault on Islamist militants.