The draft to overhaul the judiciary and the role of the military will now go to President Abdullah Gül for his signature, after which a referendum can be held within 60 days.
The main opposition party has said it will appeal to the Constitutional Court to block the referendum, which it says would cement the AK Party's grip on power.
Prime Minister Recep Tayyip Erdogan, who faces a general election set for 2011, says the reforms are needed to meet the demands of the EU, which Turkey seeks to join. He denies Islamist ambitions.
"The reform package has been approved by the parliament's general asssemby. Let it bring good things to our country," parliament speaker Mehmet Ali Sahin said after lawmakers passed the bill shortly after 2 a.m., ending a marathon session.
The bill lacked the two-thirds majority needed to instantly become law, but secured 336 votes in the 550 seat parliament - enough to put the proposals to a referendum.
The government has said it plans to hold the referendum in July, but the legal process may still face an uphill battle.
The reform drive has unsettled investors because it has stirred tensions between the AK Party, which has its roots in political Islam, and the secular elite.
The two pillars of the reforms call for overhauling the Constitutional Court - the ultimate guardian of Turkey's secular constitution - and the restructuring of the Supreme Board of Judges and Prosecutors, responsible for managing the judiciary.
Critics accuse the AK Party of using reforms to undermine the independence of the judiciary and install supporters in top judicial posts, as part of a long-term strategy to roll back secularism in Turkey.
The main opposition party has said it will appeal to the Constitutional Court to block the referendum.
Such a scenario could lead to institutional paralysis, which could force Erdogan to call a snap election.
The country's chief prosecutor, who previously tried to close down the AK Party, has said the reforms are undemocratic.
There has been speculation that he could launch a fresh attempt to ban the party, which embraces centre-right and nationalist elements as well as a core of religious conservatives and has been in power since 2002.
(EurActiv with Reuters.)
