Lawmakers said on Tuesday that the law, adopted by a vote of 147 out of 152 MPs present, stipulates eight offences that could qualify as terrorist acts punishable by death.
It defines terrorism as "any criminal act carried out by one or more persons against the security and stability of the state and/or against persons or groups of persons deliberately or blindly".
The definition also covers those acts aimed at "damaging public or private assets or of causing terror, fear or panic among the populace".
The death penalty is provided for attacks against the police or army, arming or financing people with the aim of provoking sectarian discord or civil war and vandalism of public buildings.
Also included are recourse or the threat of recourse to force, actually carrying out acts of violence, kidnapping, attacks on foreign diplomatic missions, foreign institutions and companies and international organisations.
"The culprit or partner in the act would be executed," the law says. Also the "instigator, the plotter, and whoever assists in any of the aforementioned crimes".
In the text of the bill, the authors defended its hardline stance, saying "the damage of terrorist acts reached a point at which it threatens national unity and stability".
The death penalty was rescinded in Iraq during the US-led occupation but was restored by the US-installed caretaker government in August 2004 despite opposition from key US ally Britain and other European states.