"A country that has suffered the ultimate crime and whose people's thirst for justice is still far from quenched has decided to forego a sanction that should have no place in any society that claims to value human rights and the inviolability of the person," Arbour said.
She praised Rwanda for "demonstrating leadership by action" and said the ban announced on Thursday meant countries which had refused to hand over suspects to the courts there because they may face the death penalty could now do so.
The bill was initially put forward by the president, Paul Kagame's Rwandan Patriotic Front, approved by the cabinet at the beginning of the year and by the parliament over the past two months.
As a result of the bill's promulgation, some 600 Rwandans should see their death sentences commuted to life imprisonment.
The move was immediately hailed by the European Union, which congratulated "the Rwandan government and people" for taking "this important decision."
According to the United Nations, the 1994 genocide killed 800,000 in a few weeks, mostly from the Tutsi minority.
Offloading some of the less high-profile cases to Rwandan justice has become a necessity for the Tanzania-based ICTR, which is supposed to wind up all criminal proceedings by the end of 2008, 14 years after its creation.