Uruguay will legally recognise same-sex civil unions.
The country of 3.6m people is the first nation in South America to grant such protections, although some cities and regions throughout the continent have made similar legal provisions.
The Uruguayan Congress last week passed legislation creating a civil union registry for same-sex and unmarried heterosexual couples.
The measure had previously passed the Chamber of Senators.
The new law was a manifesto commitment of the ruling leftist coalition of President Tabare Vasquez.
In March the senior Roman Catholic clergy in the form of the Episcopal Conference of Uruguay (CEP) echoed bishops in Europe by attacking the validity of gay relationships.
“In no way can homosexual cohabitation be accepted because it does not meet the basic criteria defining marriage, it is therefore unacceptable to place it in suchlike equal level,” a statement from CEP said.
The main opposition party in Uruguay, Partido National, tried to remove gay and lesbian couples from the new bill during a March debate in the Chamber of Deputies but was unsuccessful.
Same-sex marriage will remain illegal in Uruguay, something LGBT rights groups say they will continue to fight.
Because of the marriage ban judges have been unsure how to rule in a number of cases involving same-sex couples, particularly in areas of adoption, pensions and inheritance.
Senator Margarita Percovich, the author of the legislation, said the bill would give couples entering civil unions the same rights as marriage.
Under the legislation couples would have be together for at least five years and sign a registry. The couples will receive heath benefits, inheritance, parenting and pension rights.
In neighbouring Brazil, the border state of Rio Grande do Sul passed civil union legislation in 2004, two years after the city of Buenos Aires, Argentina, passed a similar law.
The decision to legally recognise gay couples in Uruguay makes the country the first in South America to have a national civil union law.