The law was adopted by national legislature after a third reading at a bi-monthly session of the National People's Congress (NPC) Standing Committee.
The amended law which will take effect on January 1 next year bans the production and sale of food made from state-protected wild animals and products derived from them.
It also bans illegal purchase of state-protected wild animals and derived products for food. Offenders could face criminal penalties, state-run Xinhua news agency reported.
It bans hunting, sale, purchase and use of state-protected wild animals or derived products, unless for scientific research, captive breeding, population regulation, monitoring of disease or other purposes.
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It mandates that permits should be obtained for the hunting, captive breeding, sale, purchase and use of state-protected wild animals or derived products.
In addition, the law stipulates that animals bred under controlled conditions through mature methods may be removed from China's special state protection list.
Animals removed from the list are regulated differently from wild ones, the law says.
Anyone who frees captive animals in a reckless manner causing property damage or physical injury to others, or jeopardising the ecosystem, will be held accountable, it said.