An official statement released from Amir Shaikh Hamad bin Khalifa Al Thani's office on Thursday has said the new law will come into force in six months.
Qatar's Housing and Civil Affairs Minister Shaikh Falah bin Jassim Al Thani says the legislation allows workers to set up unions within the establishments in which they work.
It also introduces "the right to go on strike when amicable settlements cannot be reached between employees and employers," he said.
The legislation bans employing youth aged under 16, sets the working day at eight hours and grants women equal rights with men, in addition to a paid 50-day maternity leave.
"Qatar tends to follow its own agenda, it's hard to say if other countries will follow"
Deputy Editor, MEED
The new law comes just a week after the Qatari ruler allowed the formation of professional associations for the first time in the gas-rich state, which has only about 150,000 nationals among a population of 650,000.
Angus Hindley, Deputy Editor of Middle East Economic Digest told Aljazeera.net that Qatar's new labour law eas part of the country's democratisation programme.
"This new law is part of the reforming process which has in effect been going on for more than four years," Hindley said.
'Step by step reform'
"It is part of Qatar's gradual process of liberalisation and reform."
"Things are happening step by step, from deregulating the media to women rights - and the next step that is coming will be federal elections," he added.
Qatar recently introduced a series of reforms, including a first written constitution that will usher in a partly-elected Shura (consultative) Council later this year.
Often seen as a trailblazer in the Arab world, analysts remain uncertain whether other Arab nations will follow Qatar's example of gradual democratisation.
"Qatar tends to follow its own agenda, it's hard to say if other countries will follow - Bahrain is a possibility - but I doubt other countries will do the same," Hindley said.