Since opposition parties boycotted the 2005 elections, the assembly has been made up completely of Chavez supporters.
It passed the controversial new law unanimously at a specially convened session in the main square in the capital, Caracas.
Mr Chavez is expected to use his new powers to speed up the implementation of a doctrine which he has called '21st Century Socialism'.
This would include nationalisation of strategic parts of the economy, such as electricity and telecommunications, as well as greater state control over the oil and gas sectors.
