The country’s Labour Minister Giuliano Poletti, said it was an “important day” after the Chamber of Deputies gave the bill the go-ahead.
Having already received approval from the Italian Senate, the law will come into force in the next few weeks.
Prime Minister Paolo Gentiloni described the new law as “a step forward to help families in need”.
But what will it actually entail?
Two billion euros per year
The Italian government has allocated €1.6 billion to the project in 2017, which will be distributed among those in need.
However, Poletti said that this would rise to €2 billion each in 2017 and 2018, once EU contributions were taken into account.
Previous welfare packages have generally been restricted to specific categories: the elderly, unemployed, or single parents, for example, and the country spends most of its welfare budget on pensions.
However, high levels of youth unemployment have seen the younger generation emerge – for the first time ever – as Italy's poorest. Families with young children are expected to be the main beneficiaries of the new measures, and will be eligible even if both parents are employed, if they are still considered below the poverty line.
In February, the OECD called on Italy to take “urgent action” to tackle child poverty, pointing out that the past decade had seen the proportion of Italian minors living in absolute poverty surge from three percent to 11 percent.
Children's charity Save the Children saw the situation as even more drastic, claiming that a third of Italian children were at risk of poverty or social exclusion.
Families in need will receive a reddito di inclusione (inclusion income), which will start at up to €400 each month, based on means testing, and will increase to up to €480 per month depending on circumstances.
This represents “the key pillar of the national plan to fight poverty”, Poletti said.
He expects around 400,000 families to benefit from the REI, amounting to a total of 1.77 million people
“[The REI] fills a long-standing gap in the Italian system of protecting individuals on a low income, and is the sign of a new approach to social policy,” the Labour Minister added.
The monthly benefits are not without a catch. Firstly, families will have to prove they have been resident in Italy for a certain amount of time before they can claim the inclusion income.
Those receiving the REI will have to sign a “community pact”, promising to adhere to “good standards of civic behaviour”.
Recipients must also agree to certain conditions in order to get the cash; for example, unemployed adults will have to prove they are actively job-seeking, and parents must ensure children attend school and are vaccinated.
The bill was passed with 138 'yes' votes, 71 nays and 21 abstentions – but critics say it's not enough to make a real difference.
The anti-establishment Five Star Movement party said the measure was “shameful”.
“All that's going to happen is that there will be two kinds of poor people: 'A-list' and 'B-list'” the party said in a statement. “There are nine million poor people who are waiting for a serious measure, which is universal income.”
A basic income for all citizens is one of the party's key promises, should it get into power in Italy's next general election, and it has already run a trial of the scheme in Livorno.