The expansion vote, which took place during a special state budget session last week, allows more Arizonans with low incomes to qualify for health insurance coverage.
Although Arizona Gov. Jan Brewer opposes the Affordable Care Act, she lobbied hard for months for Medicaid expansion.
By expanding Medicaid, Arizona will enable about 300,000 residents to obtain or keep health care benefits.
"I am grateful to the Arizona lawmakers who have acted with courage and conviction by completing the people's business," Brewer said in a statement.
"With landmark votes today in the House and Senate, legislatures have tacked the issue that is Job One of every session -- adoption of a responsible state budget -- and enacted Arizona's most sweeping health care legislation in decades.”
Brewer sees Medicaid expansion as a way to provide cost-effective care to Arizona's working poor.
Not everyone agrees. Republican State Sen. Kelli Ward told the Associated Press the decision was "the biggest mistake we've made in the Arizona Legislature this year and maybe ever."
Each state decides whether to participate in the Medicaid expansion. The new rules will extend benefits to individuals with an income of $15,856 and a family of three with an income up to $26,951.