The bill, authored by Assemblyman Luis Alijo, D-Watsonville, won passage Thursday by a vote of 51-25, after passing in the state Senate 26-11 early in the day.
Gov. Jerry Brown joined labor unions in offering the bill his strong support, and said he would sign it. Business groups opposed the proposed law.
The measure, called AB10, raises the minimum wage from $8 to $9 per hour on July 1, 2014, and again to $10 on Jan 1, 2016.
Lobbyists for business organizations warned the minimum wage would go up too quickly, making it "a job killer."
But advocates point out that the increase will put $4,000 more in the pockets of full-time workers, raising annual income to $20,000, for people who are most likely to increase their spending and stimulate the economy.
More than 90 percent of those on minimum wage in the state are over the age of 20.
Even now, California has among the highest minimum wages in the country, behind Washington state at $9.19, followed by Oregon, Vermont, Nevada, Connecticut, the District of Columbia and Illinois. Twelve other states have set their minimum wages above the federal minimum of $7.25.
The new law will make California's minimum wage the highest in the country, although Washington's automatically goes up each year to keep pace with inflation.