The bill eases and expands access to health services and disability benefits for veterans who were exposed to toxic smoke from the U.S. military's use of burn pits on foreign bases until the mid-2010s.
The pits, sometimes as large as a football field, were used to burn waste including plastic tires, batteries, explosives, human feces and chemicals.
Servicemembers returning home suffered from fatal respiratory illnesses and rare cancers caused by exposure to the open air pits, but were frequently denied coverage by Veteran Affairs or put through protracted self-funded legal battles in order to prove their eligibility.
"The cost of war is not fully paid when the war is over. We are now on the verge of honoring that commitment to American veterans and their families," Republican Senator Jerry Moran said ahead of the vote on Thursday.
"This is a day of our democracy actually working," Democratic Senator Kirsten Gillibrand, who championed the bill in the Senate, said at a press conference after the vote.
The issue is personal for President Joe Biden, who believes his late son Beau's fatal brain cancer could have been caused by such a pit from when he served in Iraq.
The bill will also expand coverage for servicemembers exposed to Agent Orange, a herbicide used by the U.S. military during the Vietnam War.
The bill will now go back to the House for a vote before being sent to Biden's desk for signature into law.
By Moira Warburton
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