Sixty MPs voted for the government-sponsored law to reduce the constituencies to five from the current 25, while only two lawmakers voted against. All cabinet ministers present in the chamber voted for the law.
The reform bill was the core of a bitter political crisis between the previous government and opposition MPs that led to the dissolution of parliament and early elections.
The vote was seen as opening a new chapter in the often stormy relations between the government and parliament.
The opposition, which built its election platform on the issue in June 29 polls, scored a resounding victory, winning 33 seats in the 50-member parliament, which also includes 15 unelected ministers.
Women took part in the election for the first time as voters and candidates but none of the 28 women who stood in the polls was elected.
Young activists who packed the parliament gallery reacted to Monday's vote with thunderous applause and burst into singing Kuwait's national anthem. They have been the main driving-force behind the approval of the legislation.
The new law will take effect after Emir Sheikh Sabah Al Ahmed Al Sabah signs it, but it will not be implemented until the next scheduled general elections in 2010.
Opposition candidates have alleged that the previous election system promoted corruption and vote-buying because the number of voters in some constituencies was too small and ranged between only 5,000 and 31,000 voters.
Under the new law, the number of voters in the five constituencies will range from around 38,000 to 90,000 voters. Each of the five districts would elect 10 MPs instead of two under the previous system.
A number of MPs, however, were critical that the legislation did not achieve equality among Kuwaiti citizens because of the wide difference in the number of voters in the constituencies.
"Just because we want to get out of the electoral constituencies' deadlock, we voted for the law. We wanted to approve this popular demand," said MP Khaled Al Adwah.
"No one in the chamber is opposed to the five constituencies, but there are differences about the geographic [voter] distribution," fellow MP Saleh Ashour said.
An Islamist deputy, Khdair Al Enezi, said that the bill represents the first step for wider political reforms and called for turning the oil-rich emirate into a single constituency to achieve true equality.
"Today, we put this file, which caused the dissolution of previous parliament, behind us ... Now we expect more measures towards political reforms," Enezi told reporters.
A number of analysts and MPs have expected that the new legislation will lay the ground work for allowing political parties in Kuwait, a measure still opposed by the government.
Though political parties are illegal in Kuwait, the Islamist Ummah was launched last year, and several Islamist and liberal groupings operate freely in the country.
MPs also unanimously passed a law that would exempt thousands of Kuwaiti retirees from paying additional interest on loans that they received against their pension. The government says that the bill will cost around $1 billion.
Kuwait, with a native population of 1 million people and 2 million foreigners, sits on 10 percent of global oil reserves, according to official figures. It pumps 2.5 million barrels daily.
© 2006 Agence France-Presse
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