The government also introduced legislation on Thursday that restricts assisted fertilisation to "stable" heterosexual couples only.
Bringing the realm of reproduction under the rule of a new law, critics denounced the measures as "medieval" - claiming it could be the first step towards making abortion illegal.
But the law was passed by a wide margin as some opposition senators in the Roman Catholic country crossed party lines to back the bill drawn up by Prime Minister Silvio Berlusconi's centre-right coalition.
"This law says ‘enough!’ to the abuses and recognises that an embryo is a person and as such must be protected from the point of conception," said Elisabetta Casellati, a senator from Berlusconi's Forza Italia party.
Many in Italy, which is home to the contoversial fertility doctor Severino Antinori who helped a 62-year-old woman give birth with a donated egg, felt legal restrictions were needed.
Under the bill, only infertile couples can resort to assisted reproduction and they cannot use the sperm or eggs of a donor, or resort to surrogate motherhood.
The couple must be married or provide evidence of a "stable" relationship.
The bill's backers say it guarantees a child's right to know who his or her parents are and protects its right to life.
Embryos resulting from artificial insemination cannot be frozen or used for research purposes.
"This law recognises an embryo's legal jurisdiction, I don't understand therefore why it can be killed for up to four months."
Italian senator for life
Doctors can only create up to three embryos during each attempt at insemination and all of them must be implanted in the potential mother's womb.
Some specialists say three times as many embryos are needed.
"We will now be the most backwards country in Europe," said Gavino Angius, speaker for the Democrats of the Left in the Senate. "The conditions for an attack on the [abortion] law have been created."
Opposition lawmaker Giovanna Melandri has called the bill "medieval" and "hateful" and even backers of the legislation said it could pave the way to making abortion illegal.
Giulio Andreotti, who was prime minister seven times and is now a senator for life, said: "This law recognises an embryo's legal jurisdiction, I don't understand therefore why it can be killed for up to four months."
The bill has been approved by both houses of parliament although it will now return to the lower house for a rubber stamp before becoming law.