Birds fly on a foggy day near the Dome of the Rock, located in Jerusalem's Old City on the compound known to Muslims as Noble Sanctuary and to Jews as Temple Mount, Jerusalem, January 2, 2018. (REUTERS PHOTO)
The vote was held overnight between Monday and Tuesday, with 64 lawmakers voting in favor the controversial bill and 51 against it.
The bill was sponsored by the ultra-nationalist party of the Jewish Home, a major member of Prime Minister Benjamin Netanyahu's right-wing coalition.
It requires the government to raise wider support for relinquishing control over parts of Jerusalem as part of a peace plan. It increases the number of lawmakers required to approve such a deal from 61 to 80 in the 120-seat parliament.
The law was criticized by the opposition as a serious blow to the two-state solution to the Israeli-Palestinian conflict.
The new legislation is also likely to heighten even further the tensions sparked by U.S. President Donald Trump's recognition of Jerusalem as the capital of Israel.
Trump's statement triggered wide protest in the occupied West Bank and Gaza Strip, costing the lives of at least 13 Palestinians that were killed during clashes with Israeli security forces, according to Palestinian media.
Israel seized East Jerusalem, together with the rest of the West Bank and the Gaza Strip, during the 1967 Middle East war. Israel annexed East Jerusalem shortly after the war, claiming it part of its "indivisible capital," in a move never recognized by the international community.
The Palestinians struggle against the Israeli occupation and wish to establish East Jerusalem as the capital of their future state.