The issue is a particularly sensitive topic in a country where the last time euthanasia was part of public policy it was used by the Nazis to kill more than 200,000 people with physical and mental disabilities.
Lawmakers voted 360-233 in favor, despite fears voiced by many that it could lead to charges against doctors.
The measure allows assisted suicide on an "individual basis out of altruistic motives" but threatens up to three years in jail for anyone who offers suicide to someone else "on business terms."
It was one of four bills considered in a debate that cut across party lines, and was the version favored by Chancellor Angela Merkel.
Former Justice Minister Brigitte Zypries said the measure "will open an era of great legal uncertainty" and will certainly be appealed to the Federal Constitutional Court.
"When does a doctor behave in a business fashion?" Zypries asked other lawmakers. "That is unclear." Assisted suicide has been a gray area in Germany, neither permitted nor banned by law.
The four proposals debated in Parliament ranged from fully permitting the practice so long as it's not for profit to a near-complete ban. The middle-of-the-road version that passed was proposed a group of lawmakers from all parties in parliament, ranging from Merkel's Christian Democrats to the opposition Left Party.