The law, approved by the senate and House of Representatives just before congress adjourned for its summer break, was deemed a priority by Bush and his chief intelligence officials.
The administration said the measure was needed to speed up the national security agency's ability to intercept phone calls, emails and other communications involving foreign nationals "reasonably believed to be outside the United States".
The law is designed to capture communications that pass through the US.
Civil liberties groups and many Democrats say it may enable the government to wiretap US residents communicating with overseas parties without adequate oversight from courts or congress.
Harry Reid, the senate Democratic leader, criticised the law, saying it "authorises warrantless searches and surveillance of American phone calls, emails, homes, offices and personal records for however long [it takes for] an appeal to a court of review".