It was passed by the Bundesrat, the country's upper house of parliament after being passed last month by the Bundestag, Germany's lower house, and was designed to save Germany's troubled mortgage lender Hypo Real Estate (HRE), which the government intends to nationalise.
The authorities must first, however, persuade a consortium headed by US investor Christopher Flowers to sell its 24-percent share in the bank, which lost over €5 billion ($7 billion) last year.
On Saturday, Berlin took the first step towards taking control of the bank by buying an 8.7-percent stake for €60 million.
Germany is concerned that a collapse of HRE could have catastrophic consequences similar to those sparked by the bankruptcy of US investment bank Lehman Brothers in September, which rocked financial markets worldwide.
HRE has already benefited from more than €100 billion in private and public aid to keep it afloat.
The law gives the government until June 30 to expropriate investors.
Berlin has stressed it would only forcibly seize the shares "as a last resort" and would compensate investors based on the share's stock market value, but some critics say the legislation has stoked painful memories of Nazi seizures of Jewish property in the 1930s and communist moves following World War II.