Senators backed the bill by 157 to 124 votes with three abstentions and relied on confidence votes in both houses of parliament to pass the law. The lower house Chamber of Deputies had already approved the security bill in May.
The measures, especially the criminalisation of would-be immigrants, have drawn criticism from rights groups including Amnesty international, as well as Italy's centre-left opposition and the Catholic Church.
Under the provisions, people entering Italy without permission face fines of up to 10,000 euros and immediate expulsion. Anyone renting housing to an illegal immigrant faces up to three years in prison. Critics also allege the citizen-patrols would amount to vigilante groups who are likely to harass foreigners.
"The law won't help defend Italian citizens from crime and "seriously violates the civil rights of immigrants whose work is indispensable to keep thousands of businesses going," said leading centre-left Democratic Party senator, Anna Finocchiaro.
But the ruling conservative People of Freedom party's chief whip in the Senate, Maurizio Gasparri said the government "is proud" of achieving an objective which helps fulfil promises to "combat crime".
"This legislation introduces harsher punishments to ensure more security - this is what Italian citizens want," he said.
Italy's interior minister Roberto Maroni, from the government's junior coalition party the anti-immigrant Northern League, said he was "very satisfied" by the new security law.
"The security legislation completes completes more than a year's work on security issues with the introduction of crucial norms on in key areas including the fight against illegal immigration and the mafia and security in our cities," he said.
Italy's prime minister Silvio Berlusconi won elections in April 2008 on an anti-crime platform, vowing to curb illegal immigration which, according to surveys, many Italian associate with a growing security problem in their towns and cities.
Italy in May began returning to Libya migrants rescued or intercepted at sea in international waters, triggering criticism from the Vatican and the United Nations Refugee Agency or UNHCR. The repatriations followed a deal Italy struck with Libya last year to combat people trafficking in the Mediterranean.
The Italian government rejected UNHCR's request to readmit to the country some of the African migrants who have been sent back to Libya, arguing that they are likely to be fleeing persecution, and are in need of international protection. But the request was turned down.
Under the deal with Libya, those migrants who manage to reach Italian shores are held in detention centres to establish their identity and evaluate possible asylum claims.
The Italian government argued it was necessary to increase the length of time migrants can be detained in holding centres to allow for their proper identification. Some 36,000 migrants arrived in Italy by sea in 2008, with around 30,000 landing on the islet of Lampedusa which lies between Sicily and North Africa.
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