The planned "control orders" would, in extreme cases, allow ministers to confine suspects to house arrest without trial - a move critics say overturns basic freedoms enshrined in Britain's centuries-old judicial system.
Prime Minister Tony Blair's large majority in parliament's lower chamber ensured the bill's approval by 309 votes to 233 on Wednesday, although some members of his ruling Labour Party voted against it.
But the House of Lords could throw out the legislation in coming days. Labour lacks a majority in the upper chamber.
The fight over the laws has catapulted national security up Britain's political agenda weeks before an expected election.
"There is a serious security threat to this country ... I think these people would kill thousands of our citizens if they could. I think this is terrorism without limit," Blair told parliament on Wednesday ahead of a debate on the bill.
"For these limited number of cases ... those considerations of national security have to come before civil liberties no matter how important those civil liberties are," he said.
Home Secretary Charles Clarke raised the spectre of a pre-election "atrocity" in Britain, similar to last year's train bombings in Madrid, saying: "Maybe such things can always be possibilities here too."
"Considerations of national security have to come before civil liberties no matter how important those civil liberties are"
British prime minister
But in a bid to appease critics, Clarke hinted he may allow further judicial involvement in control orders after the government unveiled minor concessions on Tuesday.
The opposition Conservative Party accused Blair of playing politics with national security and dismantling freedoms such as the presumption of innocence and the right to a fair trial that have sustained British law for 800 years. when the existing laws - brought in after the 11 September 2001 attacks on the US - expire.
The proposals were drawn up in January to replace a policy of jailing foreign terrorist suspects without trial that judges in December deemed illegal.
The government says the new powers must be in place by 14 March
Ten foreign terrorist suspects are currently jailed under existing laws.
They include Abu Qatada, a Syrian cleric who Britain says was the spiritual inspiration for the lead September 11 hijacker. Without new powers, they could walk free, Blair says.
Clarke has said house arrest orders, which would require Britain to withdraw from a clause of the European Convention on Human Rights, will not be brought in immediately.
"The home secretary is taking powers to curb the freedom of British subjects, by order, on suspicion based on limited and possibly doubtful evidence"
Parliament will have to vote before that happens.
The 10 current detainees will be freed under less severe control orders that include electronic tagging, surveillance, curfews and travel restrictions.
But the minor concessions have not convinced critics.
"The home secretary is taking powers to curb the freedom of British subjects, by order, on suspicion based on limited and possibly doubtful evidence," said David Davis of the Conservative Party.
"This cannot be the way, for a democracy that believes in the rule of law, to proceed."