The House had passed an identical version of the bill, 250-174, earlier this week.
Repeal would mean that, for the first time in American history, gays would be openly accepted by the military and could acknowledge their sexual orientation without fear of being kicked out.
More than 13,500 service members have been dismissed under the 1993 law.
Rounding up a filibuster-proof majority in the Senate was a historic victory for President Barack Obama, who made repeal of the 17-year-old policy a campaign promise in 2008. It also was a political triumph for congressional Democrats who struggled in the final hours of the postelection session to overcome GOP objections on several legislative priorities before Republicans regain control of the House in January.
"As Barry Goldwater said, 'You don't have to be straight to shoot straight,"' said Senate Majority Leader Harry Reid, D-Nev., referring to the late GOP senator from Arizona.
Even after the measure were to become law, the policy change wouldn't go into effect right away. Obama and his military advisers would have certify that the change wouldn't hurt the ability of troops to fight, and there would also be a 60-day waiting period.
Some have predicted the process could take as long as a year before Bill Clinton-era policy is repealed.