National People's Congress (NPC) Standing Committee unanimously adopted the draft law earlier approved by the ruling Communist Party of China (CPC).
"The new law comes at a delicate time for China and for the world at large - terror attacks in Paris, the bombing of a Russian passenger jet over Egypt, and killings of hostages committed by Islamic State (IS) extremist group are alerting the world about an ever-growing threat of terrorism," state- run Xinhua news agency said.
Earlier, China has appointed a top cop as its first new anti-terrorism czar to enhance coordination among all the security agencies specially in the volatile Xinjiang province where the security forces are battling militants of the al-Qaeda-backed East Turkistan Islamic Movement (ETIM).
China said several ETIM militants from Xinjiang crossed over to Syria to fight along with IS and some of them returned home to carry out attacks in the country.
Xinjiang is on the boil due to unrest among its majority Uyghur Muslim population over the increasing settlements of members of Han community from other provinces of China.
Earlier, China did not have a specialised counter- terrorism law, though related provisions feature in various NPC Standing Committee decisions, as well as the Criminal Law, Criminal Procedure Law and Emergency Response Law.
China's draft law evoked sharp criticism from US which expressed "serious concerns" saying that such a law which would do more harm than good against the threat of terrorism.
It would constrict US trade and investment in China, State Department spokeswoman Gabrielle Price said last week.
"We strongly believe that broad, vaguely phrased provisions in this draft law, along with the National Security Law passed this year and the draft Foreign NGO Management law also under consideration, would do more harm than good in addressing the threat of terrorism," Price said last week.
"We believe the draft Counterterrorism Law would lead to greater restrictions on the exercise of freedoms of expression, association, peaceful assembly, and religion within China," Price had said.
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US raised concerns over the provisions which reportedly required technology firms to install "back doors" in products or hand over sensitive information such as encryption keys to the government.
China's Foreign Ministry hit back at US, saying technology companies had nothing to fear and the Washington has no right to intervene.
"We hope the United States will stop groundless accusations and respect China's law-making processes," Chinese Foreign Ministry spokesman Hong Lei had said.
Increasing terrorist attacks have posed serious threats to China's national security and the life and property of its people, China's legislation on terrorism is completely necessary to prevent and crack down on terrorism, Hong had said.
Hong said as Internet is frequently used by terrorists in planning and conducting attacks, countries including the United States enacted laws obligating Internet operators and service providers to providing assistance to law enforcement agencies.
Similar items in China's draft anti-terrorism law is completely reasonable and will not constitute a breach of corporate intellectual property rights or citizens' freedom of speech, Hong said.
In a hard hitting commentary state-run Xinhua news agency said "by throwing bricks over China's draft anti-terrorism law, Uncle Sam has once again defended its championship of 'Master of Double Standards'," reminding the planet that only the "United States can steal a horse while others cannot even look over the hedge".
"On the contrary, as Internet is frequently used by terrorists in planning and conducting attacks, some items in the law is completely reasonable and will not constitute a breach of citizens' privacy or freedom of speech," it said.
"It should be taken as a reinforcement and contribution to the global campaign of fighting mankind's common enemy -- terrorism," it said.
In fact, the US has already enacted similar laws in its territory, which not only require technology firms to hand over encryption keys but also allow intense security checks over foreign companies operating in America, it said.
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