"The law has been passed. We see it as a very good sign of progress and it will greatly benefit Baathists," Rasheed al-Azzawi, a Sunni member of the committee which helped modify some of the language of the law, said.
"It was passed smoothly and opposition was small."
The bill is regarded by the US as vital to reconciliation efforts in Iraq but had been stalled before parliament by Shias who demanded that it also include measures to compensate victims of Saddam's government.Reinstatement
The new law will allow thousands of former party members to apply for reinstatement in the civil service and military, while pensions will be given to a smaller group of more senior members still banned from public life.
It makes a distinction between two categories of Baath party officials who have been barred from state employment since 2003.
Only senior party leaders who were in the top five of the party's 10 levels and who implemented the oppressive policies of Saddam's government would remain subject to the ban.
Middle-ranking officials and those in the bottom five levels of the party structure would be able to resume government jobs.
US officials hope the new law will go some way towards easing mistrust between Shias and Sunnis in Iraq.
On Sunday, the US president said that it was "an important step toward reconciliation", as he opened talks with Bahrain's ruler as part of his ongoing tour of the region.
Iraq's new Accountability and Justice law means:
- Low-level Baath members will be able to resume jobs in the public sector.
- Senior members will remain barred from government positions.
- All former Baathists will receive a pension.
"It's an important sign that the leaders of that country understand that they must work together to meet the aspirations of the Iraqi people," Bush said.
However, Hoda Abdel-Hamid, Al Jazeera's Iraq correspondent, said the fact that only 143 members of parliament approved the law, just three more than the quorum of 140, meant there was some opposition to the bill.
She said that immediately following the parliamentary session, a news conference was called by several opposition parties, including that of Iyad Allawi, the former prime minister.
They said the new law will only increase divisions in Iraq and further isolate Baathists who are excluded from the legislation.
On Sunday, Nicolas Sarkozy, the French president, proposed holding talks between Iraqi factions in France similar to those it hosted for Lebanon in July.
Quoted in the London-based Saudi newspaper Al Hayat, Sarkozy proposed "hosting in France, far from the heat of passions and on neutral territory, inter-Iraqi roundtable talks that are as large as possible".
In August, Jalal Talabani, the Iraqi president, declined a similar offer made by Bernard Kouchner, the French foreign minister.
Talabani said such a conference was not necessary because different Iraqi parties meet and talk every day.