Immigration department officials have started the process of releasing hundreds of children from detention on Christmas Island.
But the fate of babies born to asylum seekers, who may be removed to an offshore processing centre on Nauru, is not so certain.
Immigration Minister Scott Morrison said department officials began the work of transferring about 470 children from Christmas Island to the mainland in the early hours of Friday morning.
Senators sat past midnight to approve an overhaul of the nation's migration laws, including the return of temporary protection visas.
MPs on Friday morning took little more than 10 minutes to rubber-stamp a suite of amendments the government negotiated with the Senate crossbench.
It was a much-needed win for the government, which had its higher-education reforms knocked back by the Senate earlier in the week.
"This is a win for Australia, what happened in the Senate last night," Prime Minister Tony Abbott said.
In a sometimes heated and emotional debate in the upper house, Labor and the Greens accused the government of using children in detention on Christmas Island and elsewhere as a bargaining chip.
Mr Morrison was unrepentant, saying he would not take moral lectures from Opposition Leader Bill Shorten and Greens senator Sarah Hanson-Young on border protection.
"They demonstrated ... that they remain the problem and not the solution," he told reporters.
Mr Morrison singled out Senator Hanson-Young for special mention, accusing her of being "simply grubby" by attacking prominent refugee advocate Paris Aristotle.
"Senator Hanson-Young couldn't hold a candle to Paris Aristotle and she should apologise for what she said about him last night," he said.
The senator told parliament that Mr Aristotle had negotiated a "hostage situation hand-in-hand with Scott Morrison".
The government will now implement a fast-tracking process to clear a backlog of 30,000 asylum claims left over from the previous Labor government.
If their claims are successful they will be offered a three-year temporary protection visa or a five-year safe-haven visa if they agree to move to a regional area for work or study.
None will be offered permanent protection, however their status will be reviewed when their visas expire.
Asylum seekers whose claims are rejected could be forced out of the country without recourse to appeal.
The government, in a concession to the crossbench, agreed to provide work rights to about 25,000 asylum seekers now on bridging visas and living in the community.
That right will operate immediately, Mr Morrison said.
The government also agreed to increase Australia's humanitarian intake of refugees.
The new laws will not affect a High Court challenge a group of Tamils brought against the government over their detention at sea mid-year.
What happens to an unknown number of babies born to asylum seekers subject to offshore processing won't be clear until a separate legal challenge is determined.
The decision to support the government's overhaul was a tough call for crossbench senators, who negotiated improvements but still considered the legislation far from perfect.
Senator Ricky Muir - who was the final undecided vote - described his anguish after speaking over the phone with crying detention centre staff on Christmas Island.
"The crossbench shouldn't have been put in this position, but we have," he told parliament.
Independent senator Nick Xenophon also wrestled with the decision but, like Senator Muir, believed the amendments would give hope to thousands of people stuck in detention.
Another independent, Jacqui Lambie - who opposed the legislation - attacked the government for keeping children detained for so long.
"These kids have been sitting there for 15 months, and you want a pat on the back? You've got to be kidding yourselves," she said.
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