A new law, passed by 130 votes to 44, will force groups receiving more than 24,000 euros ($26,000) annually in overseas funding to register as a "foreign-supported organisation", or risk closure for non-compliance.
They will also have to use the label "foreign-supported organisation" on their websites, press releases and other publications.
The government of populist premier Viktor Orban says the measures are aimed at improving transparency as well as fighting money laundering and terrorism funding.
But the European Commission and the United Nations have condemned the law, with experts saying it could "discriminate against and delegitimise" non-governmental organisations (NGOs).
Two prominent NGOs said they would boycott the law and take the matter to the constitutional court and the European Court of Human Rights in Strasbourg.
"One of the fundamental pillars of a strong democracy is a strong independent civil society," said Marta Pardavi of the Hungarian Helsinki Committee (HHC), a local refugee rights group.
The Hungarian Civil Liberties Union also said it would "not comply with the requirements of an unlawful law".
Amnesty International meanwhile called the measures "a vicious and calculated assault" on civil groups critical of Orban's hardline policies.
The organisation said the move resembled legislation introduced in Russia in 2012 requiring foreign NGOs to register as "foreign agents".
The Hungarian law marks a hardening of frontlines in Orban's battle with foreign-funded NGOs, in particular those receiving support from Hungarian-born emigre Soros.
Government-backed billboard and media campaigns have targeted the philanthropist, while a questionnaire sent to households nationwide urged support for the registration of foreign-funded NGOs.
In January, a senior official from Orban's ruling Fidesz party said the "Soros empire's fake-civil groups" should be "swept out" of Hungary for attacking the government's anti-immigration line.
Earlier this month the EU's rights watchdog Venice Commission said the NGO bill was "excessive" despite pursuing "legitimate aims", and urged the government to consult local civil society groups.
It also accused "some state authorities" of staging a "virulent" campaign against NGOs.
Budapest said it took the Venice Commission concerns into account when amending the proposal last week, for example dropping a requirement for the details of all foreign donors to be named on a group's publications.
But the HHC dismissed the amendments as "cosmetic changes".
"NGOs can still be closed down if they fail to comply with the new rules," Pardavi told AFP.
"No consultations took place before the vote, while the general intent to stigmatise also remained," she said.
Tuesday's vote follows the hasty approval of another law in April that threatens to shut the Soros-founded Central European University in Budapest.
The crackdown on the CEU and NGOs sparked large protests in April in the Hungarian capital.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)