The proposed law allowing police "discretion" over drugs and treating drug use as a health issue has passed its third reading in Parliament with 63 votes in favour.
The Misuse of Drugs Amendment Bill intends to address the harm caused by synthetic drugs, and others, by ensuring that those who import, manufacture, and supply them are targeted - not those who use them.
Health Minister David Clark said in Parliament on Wednesday that the reforms "will make a real difference to the lives of New Zealanders".
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He said the Bill which will now receive royal assent was "born out of a deep concern for the spate of deaths [caused by synthetic drugs] that occurred in 2017 and 2018".
"This Government committed to responding to that situationm, to taking a constructive approach to putting together some law that would deal with the immediate drugs that had been linked to those deaths."
Synthetic drugs have claimed the lives of an estimated 60 to 65 people since June 2017.
The law reforms were proposed by the Government in December, when Health Minister Dr David Clark and Police Minister Stuart Nash revealed their plans to tackle the growing synthetics problem.
New Zealand First and the Greens have welcomed the passage of legislation.
Green Party spokesperson on drug law reform Chlöe Swarbrick said: "Today is a significant day for New Zealand and I thank our Government partners Labour and NZ First for working with us to get this passed into law."
Concerns have been raised at select committee about a clause in the proposed law that would allow discretion for police to prosecute for possession and use of drugs.
National's drug spokesperson Paula Bennett said the Government has "a million and one questions it needs to answer".
"Both the Police Association and the NZ Drug Foundation presented at select committee and agreed the Bill amounts to de facto decriminalisation of drug use," she said.
People caught possessing and using illegal drugs would face lighter charges. Police would not prosecute for possession, and personal use would merit an approach where users would be considered for rehab.
Under the law, the two main synthetic drugs (5F-ADB and AMB-FUBINACA) would be reclassified as Class A. That would give police the search and seizure powers they need to crackdown on suppliers and manufacturers.