Tasmania has become the first Australian state to make registering gender on birth certificates optional.
The landmark bill was approved in the state's lower house on Wednesday, meaning it will become law. It had already been passed in the upper house.
The bill also removes a condition that had required transgender people to have surgery before their gender was recognised.
The state government fiercely opposed the bill in its current form.
Advocates welcomed the landmark decision they said would reduce discrimination in the transgender community.
"Young transgender and gender diverse Tasmanians will grow up in a different world from the one we have known because the law will respect and protect who they are," Roen Meijers from Transforming Tasmania said in a statement.
"I hope our achievement inspires the rest of the nation to move quickly towards the reforms that are so overdue in this country."
The legislation allows anyone aged 16 or older to apply to change their listed gender without the approval of their parents.
The reforms have been met with much resistance from Tasmania's conservative-led parliament but passed after an MP crossed the floor to vote with opposition parties.
The state government said recent amendments to the bill had not been properly considered, describing the legislation as a "dog's breakfast".