His announcement, to thousands of supporters in Caracas marking May Day, came as security forces directed tear gas and water cannon at anti-government demonstrators elsewhere in the capital.
It was likely to sharpen international concerns over Venezuela's adherence to democracy and fears it was slipping over a precipice to civil conflict.
The opposition was immediately scathing of the tactic, with opposition leader Henrique Capriles tweeting that "Maduro is consolidating a coup d'etat and deepening the grave crisis."
"People, into the streets! You must disobey such lunacy!" Capriles wrote.
The head of the opposition-held Congress, Julio Borges, accused Maduro of wanting to instill "a Cuba-style system."
Maduro said he was invoking his power to create a 500-member constituent assembly representing a "working class base" and local councils to rewrite the constitution -- cutting out Congress.
The decree was needed to "block the fascist coup" he said threatened the country, repeating terms portraying his Socialist government as the victim of a US-led capitalist conspiracy.
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Ongoing protests
The new constitution-writing entity would be "a citizen's constituent body, not from political parties -- a people's constituent body," he said, adding the National Electoral Council would start work on the process on Tuesday.
Maduro's move mirrored that of his late Socialist predecessor Hugo Chavez, who in 1999 had a 131-member Constituent Assembly of various representatives draw up Venezuela's current constitution. The text was overwhelmingly passed by a referendum.
Back then, though, the charismatic Chavez enjoyed often enthusiastic public support. Maduro, in contrast, is disapproved of by seven in 10 Venezuelans according to pollsters Venebarometro.
That antipathy was evident on the streets again Monday, when riot police officers clashed with hundreds of protesters, some throwing stones, who tried to break through security barriers to the electoral council headquarters.
Opposition leaders have vowed no let-up in their protests demanding early elections to get rid of Maduro, whose term ends late next year.
They blame him for an economic crisis that has caused shortages of food and medicine.
Clashes between protesters and riot police left 28 people dead last month, according to prosecutors.
A lawmaker was injured in the head in Caracas, photographs published online by his supporters showed. Similar protests took place in other towns across the country.
"I am out fighting for Maduro to go. This is a dictatorship in disguise," said Matilde Rodriguez, 67, from the working class Petare district of Caracas.
"Venezuela is in intensive care. There is no food and they'll kill you for a pair of shoes."
Bolivarian National Guard officers clear a barricade set by protesters during an opposition May Day march in Caracas, Venezuela, Monday, May 1, 2017. (AAP) Source: AAP
'Betrayal' of Chavez
Analysts say street rallies are one of the few means the opposition has left of pressuring Maduro.
The president's demand for a new constitution was a way of running out the clock on demands for elections, they also said.
"Maduro is gaining time at the expense of everybody, including by stomping on the roadmap left by Chavez himself," said one Socialist-leaning analyst, Nicmer Evans.
"This constituent assembly Maduro wants is a clear betrayal of Chavez and the people."
The violence and political spiral in Venezuela is increasingly unsettling other countries and regional blocs.
Pope Francis has offered to have the Vatican mediate, but was rebuffed by the opposition, which walked away from a previous attempt at dialogue in December when the government did not free political prisoners or set early elections as demanded.
Maduro initially voiced support for the pope's offer. But on Monday he said the only response to dialogue was the constituent assembly he was setting up.
International unease
The president has rejected opposition calls for general elections before his term ends.
He had said he was willing to hold regional polls postponed in December, but electoral authorities did not set a date and Maduro on Monday said: "They want elections? Constituent assembly."
Maduro has bristled at what he calls international interference in his country's affairs.
Venezuela last week said it was quitting the Organization of American States after it and other international bodies expressed concern about the country's adherence to democracy.
Another regional bloc, the Community of Latin American and Caribbean States is to hold an extraordinary meeting on Venezuela in El Salvador on Tuesday.
