Until now, Germany-born children of immigrants from most non-EU countries were granted both German and their parents' citizenship at birth but then had to opt for one of them by age 23.
Under a law passed yesterday, those born since 1990 will now be allowed to keep both passports, scrapping the requirement that had forced young adults to make an often agonising choice.
The rule applies for those who at age 21 have lived in Germany at least eight years and attended school for at least six, and for holders of German school diplomas or job qualifications.
The citizenship reform was a key demand of the centre-left Social Democrats before they agreed to join Chancellor Angela Merkel's conservatives in a 'grand coalition' government last year.
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Interior Minister Thomas de Maiziere, a conservative, called the law's passage a "big step", while recalling that the debate over the change "a bitter and hard battle".
Conservatives had opposed dual citizenship in such cases, arguing that it is impossible to be loyal to two countries. In the end the law passed by 463-111 with one abstention.
"From now on every child who is born here and grows up here is and remains a citizen of this country, with all the rights and obligations," said Veit.
Germany had already allowed dual citizenship if the other country was a member of the 28-nation European Union or one of several dozen other nations.