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In a late-night vote on Tuesday, the Senate approved the Liberal government's controversial Bill C-38 by a 46-22 vote. Three senators abstained.
The historic vote comes after gay and lesbian couples launched lawsuits in different provinces demanding the right to marry.
Courts in seven provinces agreed that the traditional definition of marriage violated the Charter of Rights and Freedoms.
Peace Tower lit up in a rainbow of colours Tuesday night, Ottawa.
The Liberal government responded to the first of those rulings – in Ontario in 2003 – by introducing legislation which was adopted last month in the House of Commons.
Conservative Leader Stephen Harper has said he will bring back the same-sex debate if he's elected prime minister.
Canada now joins the Netherlands, Belgium and Spain as the only countries legalizing gay marriage.
Tory motion rejected
Senators rejected a Conservative motion stating the traditional definition of marriage is between a man and a woman, but that civil marriage is between two people.
"It would have brought a great deal of comfort to same-sex couples that they would not be perceived as having somehow gained their legitimate rights at the expense of those for whom the traditional marriage of a man and a woman was so terribly important," said Conservative Senator Noel Kinsella, who supported the amendment.
B.C. Senator Gerry St. Germain, an outspoken critic of the bill, fears judges are determining policies that should be decided by conscience.
"If we don't stop this ... I know what the next steps are. Euthanasia. Decriminalization of marijuana," said St. Germain.
But Senator Nancy Ruth, who voted for the bill, danced in the red chamber moments before the vote.
"There are some reasons to dance tonight and the whole country should be dancing," she said.
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