The US Congress has voted to extend the anti-terror law known as the Patriot Act - but only for a month.
Mr Bush says the bill is a vital tool in the fight against terror
The move is a rebuff to President George W Bush who wanted the legislation extended indefinitely.
The Patriot Act, introduced after the 11 September attacks, gives the US government extra powers to monitor terrorism suspects and their finances.
Democrats have grown increasingly concerned, believing the Act infringes Americans' civil liberties.
The restricted extension to the life of the Patriot Act means it will again be debated in Congress in January.
For the White House, that will be an unwelcome addition to a crowded political diary in a year when the focus will be on the mid-term elections, says the BBC's Daniela Relph in Washington.
Approval for the shorter deadline came in a vote after Republican James Sensenbrenner, chairman of the House Judiciary Committee, refused to agree to a six-month extension which had been passed by the Senate on Wednesday.
He said such an extension would allow the Senate to duck the issue of whether to renew 16 provisions of the Patriot Act, negotiate a new bill or extend the 2001 law further.
The Senate reconvened late on Thursday and swiftly approved the one-month extension.
The White House had lobbied determinedly for the provisions to be passed and hoped to satisfy critics by adding new safeguards and expiration dates for the most controversial elements.
These included roving phone taps and secret warrants for documents from businesses and hospitals, and for records of library books taken out by private citizens.
President Bush had urged a longer extension, saying that "our nation's security must be above partisan politics".
But Senate Democratic leader Harry Reid said his party had sought a short-term extension in order "to seek a Patriot Act that gives the government the tools it needs to fight the terrorists, while still protecting the rights of innocent Americans".
The president said he would sign the one-month extension into law.
"It appears to me that the Congress understands we got to keep the Patriot Act in place, that we're still under threat, there's still an enemy that wants to harm us," he said.
The House of Representatives also approved a $453.3bn defence budget, which includes $50bn for operations in Iraq and Afghanistan.