The new law switches the focus of criminal charges from sellers of sex to potential buyers, and prohibits advertising sexual services.
"We're targeting Johns and pimps, those that treat sexual services as a commodity," Justice Minister and Attorney General Peter MacKay said yesterday.
He said the measure will endeavour to protect communities as well as vulnerable people, "and recognises the inherent dangers associated with prostitution."
Under the law, penalties will range from a USD 1,000 fine to 14 years in prison.
The Supreme Court in December struck down key provisions of the original law that effectively criminalise prostitution, saying that they endangered prostitutes.
But the high court stayed its unanimous decision for one year to allow Parliament to consider whether or not to impose other limits on where and how prostitution may be conducted.
The legal challenge was brought by three sex workers who argued that Canada's restrictions on prostitution -- criminalising keeping a brothel, living off prostitution or soliciting sex in public -- put their safety at risk.
The three Toronto women -- Terri-Jean Bedford, Amy Lebovitch and Valerie Scott -- argued that prohibiting brothels, for example, endangered prostitutes by forcing them to seek customers on street corners.
The law, they said, had also prevented them from taking safety measures such as hiring security guards or screening potential clients in an effort to protect themselves from violence.
They called for the right to open brothels to provide a safer environment for prostitutes.
A lower court found the measures, aimed largely at curbing nuisance crimes linked to prostitution, to be "arbitrary, overboard or grossly disproportionate," and indeed put sex workers at risk.