BBC News
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The constitutional amendments also hugely increase the president's powers.
Amid protest and counter-protest in the capital Colombo, MPs in the 225-member parliament voted for the proposals by 161 to 17 against.
The main opposition United National Party boycotted the vote, but many of its MPs voted with the government.
The move to lift the two-term presidential limit allows Mr Rajapaksa to stand again in 2016.
'Bribes and threats'
The amendments also empower him to appoint all the top judges and commissioners for elections, human rights and other affairs, unfettered by any legal veto.
On Wednesday, Prime Minister Dissanayake Mudiyanselage Jayaratne said there was nothing undemocratic about the plans as he presented the amendments to parliament.
The BBC's Charles Haviland in the capital Colombo says some opposition supporters accuse the government of using bribes and threats to secure MPs' votes, which the administration denies.
He says a steady flow of MPs from the already weak opposition United National Party coalition had declared they would vote with the government.
The administration had been expected to easily win the two-thirds majority needed to pass the amendments.
Civil society activists called Wednesday a "black day" and asked Sri Lankans to wear that colour.
Mr Rajapaksa is popular among the country's Sinhalese majority for presiding over the defeat in May last year of the Tamil Tiger rebels, after a 25-year separatist insurgency.
The president, who was resoundingly re-elected for the second time in January, had said the measures would strengthen democracy in Sri Lanka.
Critics accuse him of trying to set up a family dynasty - his son is an MP, and three of the president's brothers are in top positions.
© BBC News
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