US Senators voted through the night to push through the Inflation Reduction Act – a flagship measure tackling climate change, tax and healthcare.
After a marathon session the bill was finally passed on Sunday night, with the aid of vice president Kamala Harris exercising her casting vote.
The bill, which still has to clear the House of Representatives, had been heavily scaled down from the $3.5 trillion package which was presented to Congress in the early days of the Biden administration.
President Joe Biden and his allies were forced to ditch many of their pledges because of the opposition of two Democrats – Joe Manchin and Kyrsten Sinema – in the evenly divided Senate.
The $454 billion (£376 billion) should be on the president’s desk within a few weeks.
Although if it is far more modest than Democrats had hoped – the passage of a key bill is a welcome boost for Mr Biden, whose poll ratings have plummeted over the past year.
It is estimated that the climate provisions, designed to wean the US off fossil fuels, could help reduce America’s greenhouse pollution to 60 per cent of 2005 levels by the end of the decade.
The bill passed after a gruelling marathon session for senators in which 88-year-old Chuck Grassley took 10-minute naps to get through the night and 89-year-old Democrat Diane Feinstein shuttled between her office and the Senate floor.
Key provisions include spending $390 billion to tackle climate change with $60 billion being spent on clean energy including promoting solar and wind power.
The bill also established a minimum 15 per cent corporate tax rate on American companies, which is expected to generate $739 billion over the next decade.
Other measures include $64 billion to subsidise healthcare and a $2,000 annual cap on the cost of drugs for elderly Americans who receive Medicare.
But Mr Biden was dealt a blow when Senate Republicans succeeded in blocking a $35 a month cap on the cost of insulin, limiting the concession to Medicare recipients.