Mr Sarkozy said the 35-hour week hampered France's competitiveness
France's parliament has passed a law which effectively ends the country's compulsory 35-hour working week.
The new law will allow companies to strike individual deals with unions on working hours and overtime.
Since coming into office last year, President Nicolas Sarkozy has blamed the 35-hour week for damaging France's economic competitiveness.
Introduced 10 years ago by the then Socialist government, polls show most French still support the 35-hour week.
Aimed at cutting unemployment, it was credited with creating some 350,000 new jobs between 1998 and 2002 - but the state had to provide billions of euros in aid.
Mr Sarkozy, analysts say, has been careful not to do away with the popular 35-hour working week completely.
The new measures - which allow individual firms to agree a maximum number of working days, overtime and time off in lieu directly with staff - are expected to come into force at the end of August.
"Companies will at last be able to operate a management policy based on a secure legal framework, it's a remarkable advance for the economy," said Daniele Giazzi of the governing UMP party.
Having been approved earlier this month by the National Assembly - France's lower house of parliament - the measures passed a vote in the Senate, the upper house, late on Wednesday.
The bill was supported by the Senate's centre-right majority but opposed by the opposition Socialists.
The Senate also adopted other key measures reforming rules on strikes and unemployment benefits, tightening up the criteria for receiving them.
Unions say the new measures will mainly affect smaller and medium-sized firms.
"In the big companies, no-one wants to renegotiate the 35 hours and reopen Pandora's Box," said Philippe Jaeger, of managers' union CFE-CGC.