The first charter schools are expected to open in term one next year after the legislation passed its final hurdle in Parliament on Tuesday night.
The controversial law, which allows private businesses and charities to run schools outside of the state and private system, was part of the agreement between National and the ACT party.
The schools will not be subject to normal rules regarding hours and holidays, will not come under the Official Information Act, and will not have to hire registered teachers.
The Education Amendment Bill passed its third reading in Parliament last night and the first schools are due to open at the start of the next school year.
There have already been 35 applications to run charter schools, with successful applicants due to be announced soon.
ACT leader and Associate Education Minister John Banks said the schools would provide more flexibility.
Charter schools, also known as partnership schools, would have to meet strict targets, he said.
"Partnership schools provide new opportunities to succeed," he said.
Education Minister Hekia Parata also welcomed the new schools which she said would provide a new approach to education.
"The range of applications we have received has been impressive and I look forward to seeing the first schools open at the start of the next school year," she said.
Green Party co-leader Metiria Turei said students were being "exploited and experimented on" by Banks and his "mad ACT policies".
"It will be New Zealand children who are left to find a decent education somewhere," she said.
Separately, the bill also gave search and surrender powers to schools where a student had potentially harmful material, and it established the primary responsibility of Boards of Trustees was ensuring all students reached the highest possible educational standards.
- The Dominion Post