First announced by the ruling Communist Party's leadership in November, the decision was officially sanctioned by the standing committee of China's top legislature, the National People's Congress, the official Xinhua News Agency reported.
Implemented around 1980, China's birth policy has limited most couples to only one child, but has allowed a second child if neither parent has siblings or if the first born to a rural couple is a girl.
Demographers and policy makers have estimated the easing would benefit some 15 million to 20 million Chinese parents - mostly in cities - and result in 1 million to 2 million extra births per year in the first few years, on top of the 16 million babies born annually in China. They say the easing is so incremental that the extra births are not expected to strain resources such as the health care and education.
China has credited the restrictive policy with managing its population growth and improving the economy, but critics say it is a violation of human rights.
China is the world's most populous country with 1.35 billion people.