The Lokpal and Lokayuktas Bill, 2011, which has been pending in the House for the last two years, was approved by voice vote after a five-hour debate.
Samajwadi Party, which was strongly opposed to such a measure, boycotted the House proceedings after staging a walkout as soon as the debate began this morning.
The proposed law, aimed at dealing with the menace of corruption, will bring under its purview the Prime Minister with certain safeguards and other public servants.
The Bill was brought back to the Upper House after being considered by the Parliamentary Select Committee which recommended several amendments to make it widely acceptable among political parties.
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Among the amendments accepted by the government are delinking of the mandatory creation of Lokayuktas by the state governments, one of the provisions which had stalled the passage of the bill in December 2011.
Replying to the debate, Law Minister Kapil Sibal said it was a "historic" day and hoped that all states would pass similar legislations to set up Lokayuktas modelled on this bill.
Sibal, who had initiated discussion on the issue, said the law alone would not eliminate corruption but it could help deal with those who are corrupt.
On the issue of bringing the Prime Minister under the purview of the new law, he said the overall consensus was in this favour although there were some "discordant individual views" disfavouring it.