German listed companies will be obliged to have at least 30 per cent women at non-executive board level from 2016.
But the Bundestag vote, hailed as "historic" by Germany's ruling grand coalition, was viewed with mixed feelings by German businesswomen.
About 100 blue-chip companies are likely to be affected by the new legislation, while the new law obliges a further 3,500 companies to set by next September binding targets to increase women at board and management level.
The new legislation will be applied as vacanies arrive on boards; if companies are unable to fill required proportion of supervisory board seats with women candidates, they will be legally obliged to leave the seat empty.
For the federal civil service, additional provisions will require a 50/50 men/women split in all jobs.
"We're taking a historic step for Germany, " said Manuela Schwesig, the Social Democrat (SPD) minister for women, family and youth. "If there are no equal opportunities at the top of companies, there are none in other areas either."
The legislation, passed ahead of International Women’s Day on Sunday, did not meet with universal approval.
The SPD pushed the law through, on its fourth draft, after significant resistance from its Christian Democratic Union (CDU) coalition partners. Its leader, chancellor Angela Merkel, is on the record as opposing binding quotas for women.
The opposition Greens and Left Party abstained from voting on the proposal in protest that the 30 per cent quota was not higher. Germany’s industry federation criticsed the quota as “purely symbolic policy”.
Womens’ groups have given qualified praise for the move, pointing out that German women still earn on average 22 per cent less than men, seven points more than Irish women.
Other women’s groups said the vote would do little to improve how Germany, inventor of the kindergarten, has fallen behind its neighbours in childcare provision.
"It's a shame we even need a quota and I'm afraid women will now be branded 'quota women' rather than rising through the ranks on their own merits," said Julia Dettmer, deputy head of Germany's Young Business Association. "What we really need is improved childcare for women in firms, progress on which may slow down now because people think the equality problem's been solved."
In January a study by Berlin’s DIW economic institute showed that Germany’s 200 largest companies had 18 per cent of women at supervisory board level but only 5.4 per cent on executive boards.
Responding to the vote, former EU justice commissioner Vivane Reding retweeted in congratulations her memorable remark: "I don't like quotas but I like what they achieve."