The controversial measure was passed into law with 172 votes in favour, 99 against and one abstention.
The law will enable regions to request more power over how the tax revenues collected in their areas are spent.
Opposition parties say it will worsen Italy’s north-south divide.
It is one of several reforms by Giorgia Meloni’s executive that the opposition are fiercely contesting.
Most of the Italian opposition parties staged a rally in Rome on Tuesday to “defend national unity” in the face of these reforms.
They also protested against alleged “violence and intimidation” by the ruling coalition after an MP for the 5-Star Movement (M5S) needed medical attention following a brawl in the House last week.
ANSA
