Victoria's corruption watchdog will be empowered to crack down on so-called "grey corruption" under legislation passed on the final sitting day of the current parliament.
Ben Carroll vowed to bring the changes forward when he became premier in July.
The laws also grant IBAC "follow the dollar" powers to investigate third parties.
Victoria has passed integrity laws empowering the state's anti-corruption body to follow financial trails and target a broader range of misconduct.
Premier Ben Carroll vowed to bring some of the changes forward in one of his first acts as premier in July.
The laws grant the Independent Broad-based Anti-corruption Commission (IBAC) the ability to "follow the dollar" and investigate non-government entities, such as subcontractors, who have benefited from public funding.
IBAC had been seeking the changes, saying it could only investigate corruption within public bodies except in specific circumstances.
The legislation also broadens the definition of "corrupt conduct" so it is no longer tied to a criminal offence but can include "a serious disciplinary matter".
This means it can investigate so-called "grey corruption" — practices like pork-barrelling and cronyism that are against the public interest but are not strictly illegal.
Integrity experts have long expressed concerns that the narrow definition left the watchdog powerless to act on misconduct.
The legislation passed after government amendments were negotiated during the final sitting day of the current term of parliament on Thursday afternoon.
Mr Carroll vowed to make integrity a priority when he took office two months ago, announcing a royal commission into the state's corruption sector as well as fast-tracking the IBAC powers.
"I'll be very proud as premier to get this through," he said of the bill on Thursday.
The amendments will allow IBAC to investigate historical claims of corruption received before today's bill passed — although they stop short of allowing IBAC to reopen closed or dismissed investigations.
Green leader Ellen Sandell said the amendments served as a legacy for late Greens MP Tim Read, who championed the reforms during his time in parliament.
The Member for Brunswick died last week at the age of 64 after a battle with metastatic cancer.
"We wish he were here to see these laws pass today but we know how proud he would be of the changes the Greens have made today to strengthen our anti-corruption watchdog," Ms Sandell said in a statement.
The Greens said its negotiations would make it easier for IBAC to decide to hold public examinations without needing to justify "exceptional circumstances".
A second tranche of reforms — including those related to IBAC's police oversight role — will be dealt with next year.