The bill, which also makes accounting fraud a criminal offense, won strong approval in Italy's Lower House, with 280 voting in support, 53 voting against and 11 abstaining.
Those convicted of accounting fraud, which was decriminalized in 2002 by Silvio Berlusconi's government, will face jail terms of up to ten years
The law will also see those convicted of corruption, including bribery and public contract rigging, jailed for up to ten years.
The anti-corruption bill follows a wave of scandals surrounding Italy's public works, including the high-profile Expo trade show in Milan and Venice's flood barrier project, Moses.
Corruption severely taints Italy's image abroad, with the country ranking 69th in Transparency International's 2014 Corruption Perceptions Index, and is often cited by foreign investors as a major deterrent.
Prime Minister Matteo Renzi celebrated with a tweet, vowing to "change the country at whatever cost".
Anticorruzione e falso in bilancio sono legge. Quasi nessuno ci credeva.Noi sì. Questo Paese lo cambiamo,costi quel che costi. #lavoltabuona— Matteo Renzi (@matteorenzi) May 21, 2015