The final part of the route, linking Princes Street, the Leith-Granton shoreline and Haymarket, was agreed by 84 votes to 17 on Wednesday.
The move follows a bill to build a tram line from the city centre to Edinburgh Airport which was passed last week.
The final go-ahead for the project will depend on an Edinburgh City Council decision later this year.
As MSPs passed the Edinburgh Tram (Line One) Bill, Transport Minister Tavish Scott repeated the Scottish Executive's promise of £375m towards the project.
However, he said: "The transport budget has many calls upon it and I cannot make any commitment that future executive funding will be made available."
The SNP voted against the bill, saying the money should be spent upgrading Waverley Station instead.
The Conservatives backed the bill but said the business case for the tram line had not yet been made.
'Projected cost'
In January, Edinburgh Council proposed a phased approach to merge parts of both lines.
Leith would be connected to Granton and the airport line extended to Newbridge at a later date.
The council's project promoters, Tie (Transport Initiatives Edinburgh) said the projected cost of the full scheme is between £634m and £714m.
The Scottish Executive has pledged £375m plus inflation, subject to receiving a confirmed scheme and robust business case.
A cross-party committee of MSPs set up to examine the details of the northern loop endorsed the Edinburgh Tram (Line One) Bill three weeks ago.
Tram Line Two serving the airport has already been approved.
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