The bill was designed to improve US defences against smallpox, anthrax and other deadly germ agents, by stockpiling vaccines, improving food inspections and boosting security for water systems.
In a White House ceremony after the signing, Mr Bush said it was his "urgent duty" to prevent germ warfare, and that last autumn's anthrax attacks were a wake-up call for the US government.
"Biological weapons are potentially the most dangerous weapons in the world," he said.
"It's important that we confront these real threats to our country and prepare for future emergencies."
Prepared for attack
As well as increasing stockpiles of vaccines to combat a potential bioterrorism attack, the bill aims to increase the federal government's supplies of potassium iodide, which can be used to help people exposed to radiation.
Bioterrorism law
Increase stockpiles of vaccines
Tighten food inspections
Increase security of water supplies
Widen availability of potassium iodide
Tighten regulation of toxic agents
Modernise laboratories
Increase training for dealing with attacks
Supplies will be given to authorities within 20 miles (32 kilometres) of a nuclear power plant.
Hospitals and public health agencies are to be given $1.6bn to receive training and resources to recognize, treat and contain an attack.
The Centers for Disease Control and Prevention in Atlanta are also in line to be modernised - and rules on the possession, use and transfer of over 30 toxic agents have been tightened.
President Bush also used the opportunity to press the need for a new government department dealing with domestic security.
"If we're going to succeed, we need to reorganise our government. And that's why I look forward to working with Congress to create the Department of Homeland Security," he said.
Congress has been working on the bioterrorism bill since the 11 September attacks on New York and Washington, and the process was accelerated after the anthrax attacks shortly afterwards.
Suspects transferred
The United States, meanwhile, said it transferred 34 more al-Qaeda fighters from Afghanistan to its detention centre at Guantanamo Bay, Cuba, on Wednesday.
This brings to 468 the number of prisoners being held at Camp Delta.
"Today was a good day for us. We helped get 34 suspected terrorists off the battlefield and out of the fight," said US Army Lieutenant Colonel Joe Hoey.
Extension work under way at the island naval base will eventually provide space for nearly 2,000 detainees.