The contentious legislation, dating from the 19th century, sets out the terms of the relationship between the Crown and First Nations and there is widespread agreement that it isn't working.
But there is disagreement over how to fix it.
Last week, the Conservatives moved forward with a private members' bill that would delete several sections of the Act as a start toward fully dismantling it.
On Monday, the Liberals introduced their own motion calling for a formal negotiation process to replace the old legislation with something better suited to current realities.
"It's not enough to say we're simply going to repeal the Indian Act," interim Liberal Leader Bob Rae said.
"There has to be a process of negotiation, of discussion so that there can be genuine government to government relationships that establish a new understanding of mutual confidence of mutual transparency and yes, mutual accountability."
But the motion was shot down by the aboriginal affairs minister who said it will just hold up what progress the Conservatives are already making.
"What the Liberals are now proposing is more talk, more delays and more inaction," John Duncan said.
"What we are doing is taking concrete steps to improve education, access to safe drinking water, transparency for First Nations governments and protecting the rights of women and children."
Rae says the Conservative bill was drafted without consultation with First Nations communities, while his own motion is the product of extensive talks.
Tory MP Rob Clarke, who is sponsoring the bill, has said his version was drafted after his own consultations and there will be more opportunity for feedback from First Nations communities.
His bill would repeal sections of the Act including those that deal with wills and the right to change bylaws on reserves. It would also remove all references to residential schools.
The government says it will support Clarke's bill.
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