This will enable an estimated four to five million overseas workers to vote in the 2004 presidential elections.
Those who have renounced their Philippine citizenship will be disqualified, but permanent residents overseas can do so if they promise to return to the Philippines within three years.
Filipinos abroad
Senator Edgardo Angara, the author of the bill, said that he was 'extremely elated' by its successful passage.
He predicted that giving the vote to overseas workers would have a significant impact on Philippines politics, putting greater emphasis on international relations.
"This bill will enable Philippine politicians to pay more attention to foreign policy and stop being so inward looking," he told BBC News Online.
There are estimated to be 7.4 million Filipinos working overseas, about two million of which live in the United States and 1.5 million in the Middle East.
This diaspora, which makes up nearly 10% of the Philippine population, sends home more than $6bn a year.
Their contributions are widely thought to have underpinned the economy in recent years.
Logistics
With only a year to go until the presidential election in 2004, the logistics of the enfranchisement remain formidable, according to Senator Angara.
He said that the extension of voting rights to such a large and widespread constituency was unprecedented.
But he said he was certain that by using personal voting in embassies, and also experimenting with postal voting, the obstacles could be overcome.
There have been fears that the cost of extending the vote to Filipinos across the world would be so expensive as to render it impractical.
But the Elections Commissioner, Benjamin Abalos, told the AFP news agency that he had been assured by legislators that 1bn pesos ($18.5m), would be available to fund the initiative.