"This is the first response in decades to this drama," Prime Minister Enrico Letta said, after the package of measures was given the green light by parliament on Wednesday.
Action includes testing farmland and irrigation channels over the next 150 days to see which fields have been contaminated by the dumps and ensure produce grown on them are withdrawn from markets.
The measures also include health tests from May for some 1.3 million people in at-risk areas around Naples in the south of the country, in the largest campaign of its type in Italy since 1973, when Italians were vaccinated en masse against cholera.
The local Camorra crime syndicate has been burning and secretly burying millions of tonnes of waste in the Campania countryside for decades but the extent of the problem has only recently been revealed.
Furious citizens have held protests over the past few months to insist the government take action.
According to environmentalist group Legambiente, some 10 million tonnes of industrial waste from across Italy and farther afield was buried in the area between 1991 and 2013.
The Pascale National Tumour Institute says the number of tumours in women in the area has risen by 40 percent and those in men by 47 percent, and local cemeteries have sections for the growing number of child victims.