A vote of 59 to 39 saw the legislation passed, meaning that the regulatory overhaul of the US financial sector is now set to become a reality.
The bill must now be reconciled with one passed by the House of Representatives late last year before the changes it proposes can go ahead.
One of the key components of the act centers around "resolution authority", which grants regulators the power to wind down any large financial institution, including banks.
A new consumer-protection bureau will also be established, while derivatives trading is going to be made more transparent.
Shareholders are to be given a vote on boardroom bonuses as another part of the measures.
President Obama expressed his delight at the passing of the act, labeling it as a victory against Wall Street and the organizations which attempted to block the changes.
"Over the past year, the financial industry has repeatedly tried to end this reform with hoards of lobbyists and millions of dollars of ads," he said.
"When they couldn't kill it, they tried to water it down."
The president expressed his belief that the reform will mean an end to state-funded bailouts of the financial sector.
"Taxpayers will never again be asked to foot the bill for Wall Street's mistakes. There will be no more taxpayer-funded bailouts. Period."
When the financial crisis struck in 2008, it led to the creation of the $700 billion Troubled Asset Relief Program.
Last December, the Obama administration announced it was expanding the lifespan of the scheme, which provided bailout funding to financial institutions such as Citigroup, Wells Fargo and Bank of America, but limiting its size to a maximum of $560 billion.
By Gary Cooper