Obama signed the bill late last night hours after the Senate voted in favour of it by 67-32, significantly reversing America's most controversial surveillance program since 9/11.
Republican-controlled Senate voted in favour of the bill more than 36 hours after some of the key provisions of the Patriot Act Expired.
"After a needless delay and inexcusable lapse in important national security authorities, my Administration will work expeditiously to ensure our national security professionals again have the full set of vital tools they need to continue protecting the country," Obama said.
The new law puts a limit on the National Security Agency (NSA) ability to scoop up and store telephone numbers, dates and times of calls from millions of Americans who have no connection to terrorism.
The NSA's practice of bulk collection of Americans' data was disclosed by former contractor Edward Snowden.
"Rather than act swiftly on this bipartisan measure, Senate Republicans created an avoidable crisis that shut down vital intelligence gathering," she said.
Senator John McCain, Chairman of the Senate Armed Services Committee, who voted against the bill said the USA Freedom Act fails to provide the intelligence agencies with the critical capabilities the country needs to prevent future terrorist attacks against homeland.
The Information Technology Industry Council (ITI) welcomed the passage and sign of the Freedom Act.
"This bill is a critical step in restoring America's reputation as the leader in protecting the privacy and security of user data," he said.
Republican presidential aspirant Senator Marco Rubio voted against the bill, saying the 'USA Freedom Act' weakens US national security by outlawing the very programmes the intelligence community and the FBI have used to protect Americans time and time again.
