President Luiz Inacio Lula da Silva's veto in October was supported by Indigenous groups, while the bill, which limits claims to ancestral lands where Indigenous people lived in 1988, had the backing of Brazil's powerful farm lobby.
Lawmakers from both chambers voted overwhelming to overturn Lula's veto.
Indigenous leaders and advocates gathered in the capital Brasilia to protest Congress' decision.
They say protecting their lands is the best way to preserve the Amazon rainforest, which scientists say is crucial to curbing climate change.
"I want to say to all of you, what has happened now in Congress, is the route to destruction."
Chief Raoni Metuktire of the Kayapo people has become an international symbol for the fight against deforestation.
In an interview with Reuters, Metukire called on Congress to do better by the country's nearly 1.6 million Indigenous people, many of whom have been threatened by the advance of Brazil's agricultural frontier into the Amazon.
"I really want you, deputies and senators, to work for the good of all of us, just for us to work and live within our territory."
"I want to say to other indigenous people who are listening that we have to unite, all the relatives have to get together. If you keep saying that the white man can do work in the village, mining, timber, these things, it's going to be very bad for us."
Opposition lawmakers meanwhile argue that Indigenous people do not face a shortage of land, but of support to develop the land they already own.
And Brazil's congressional farm caucus has argued that greater legal security would curb often-deadly land conflicts.
But Indigenous leaders have warned that the legislation backed by the farm lobby, would, in fact, escalate such violence.
The issue is expected to be decided by the Supreme Court, which ruled in September that the 1988 deadline was unconstitutional.
