The bill, which was approved 34-32, would relax rules on stem cell research and allow therapeutic cloning of embryos for medical research. The House of Representatives still needs to pass the bill before it becomes law, but lawmakers had expected the Senate to pose the biggest hurdle.
The emotional debate on the legislation introduced by a former health minister, Sen. Kay Patterson, began Monday.
Opponents, including Health Minister Tony Abbott, warned that therapeutic cloning is open to abuse and could create animal-human hybrids.
Parliament passed Australia's first laws on stem cell research in 2002, allowing scientists to extract stem cells from spare embryos intended for in vitro fertilization but preventing them from using them for cloning.
Should the bill pass the House, all cloned embryos would have to be destroyed within 14 days and could not be implanted in a woman.
Last minute amendments to the bill proposed by the Australian Democrats minor opposition party, increased from 10 to 15 years the prison sentence for flouting safeguards designed to prevent abuse of embryonic cloning.
Another amendment prevented researchers from getting licenses for creating human-animal hybrid embryos.