The end of "phase one" of the coalition government has been hailed as a landmark day in the rolling back of Labour's "database state".
The Liberal Democrats said the passing of the Protection of Freedoms Act - on the last day of the Parliamentary session - was "a milestone in the fight to claw back our civil liberties".
Among other measures, the act will curb 'snooping' by councils and schools and reduce the number of DNA samples stored, the party said.
But the boast came as a fresh row over state surveillance loomed, ahead of next week's Queen's Speech and the start of the next parliamentary session.
The Protection of Freedoms Act became law as the longest Westminster session since the Restoration in 1660 ended - a full two years after the Coalition was born.
Tom Brake, co-chairman of the Lib Dem Home Affairs policy committee, said the act would:
Stop town halls snooping on people, checking their bins or school catchment area.
Require parental consent before schools can obtain the fingerprints of children under the age of 18
Impose stricter regulations on CCTV and number plate recognition cameras
End the storage of DNA for people arrested and charged but not convicted of a minor offence
Restrict the use of CRB checks to those working with children and the vulnerable
Brake said the passage marked the end of a four-year campaign by the Lib Dems for a "Freedom Bill" - launched by Nick Clegg, as the party's Home Affairs spokesman. He added: "This is a milestone in the fight to claw back our civil liberties.
"Under the Labour government, our civil liberties were steadily eroded by an increasingly over-bearing security state.
"Liberal Democrats have done the right thing to clear up Labour's mess by ending these shameful practices with the Protection of Freedoms Act."
However, the Queen's Speech next week is expected to include a bill to allow the security services to monitor messages sent via Skype and social networks.
Specific plans have not yet been brought them forward, but the move has alarmed many Lib Dems and triggered a row between David Cameron and Clegg. Some Lib Dems fear the coalition is sliding back towards the very 'surveillance state' the party came to power to remove.