The lower house of India's parliament has approved a bill which reserves 27% of places in all government-run higher education for low caste people.
Currently, 22.5% of college places are reserved for tribals and those who are traditionally at the bottom of India's caste hierarchy.
The bill will become law only after it is approved by the upper house on Friday and then by the president.
The move had been strongly criticised by a wide cross-section of groups.
Medical students, business leaders and teachers have all complained that it would lead to a drop in standards.
But the BBC's Ayanjit Sen in Delhi says that the plan has the support of millions of low caste Hindus who make up for more than half the population of the country.
Although the law officially bans caste discrimination, India's lower castes remain at the bottom of society and are poorly represented in major professions.
In October, the country's supreme court upheld a move by the government to allocate quotas for promotions in government jobs for lower caste Indians.
But the court said that the authorities would have to prove that these groups were poorly represented in government.
Such affirmative action plans for lower castes are a hugely controversial issue in India and have resulted in big protests.
A government job in India is highly coveted, with many seeing it as a ticket to economic security.