A Senate panel voted 13-5 to back the measure, after a plan to allow people to sponsor same-s** partners for permanent legal status was withdrawn.
The full Senate will now debate the proposal next month.
The bill is widely seen as the biggest overhaul of US immigration policy in more than a quarter of a century.
But lawmakers’ last attempt at immigration reform was more recent – a bipartisan bill failed in the Senate in 2007.
After Tuesday evening’s vote, immigration activists who had crowded into the Senate judiciary committee room cheered.
In a statement, President Barack Obama congratulated the panel.
Barack Obama said the bill was “largely consistent with the principles of common sense reform I have proposed and meets the challenge of fixing our broken immigration system”.
The president added he was “hopeful” the amendment process would “lead to further improvements”.
Senate Republican Leader Mitch McConnell said he would not block the measure from coming to the floor for a full debate, but did not say how he planned to vote.
Three Republicans joined all 10 Democrats on the committee in voting for the bill.
Approval came after committee members agreed to a Republican move to ease visa restrictions on hiring skilled workers from countries such as China and India.
The Democratic chairman of the committee, Patrick Leahy, also withdrew an amendment that would have allowed people to sponsor same-sex partners, who are foreigners, for permanent legal status.
“I don’t want to be the senator who asks people to choose between the love of their life and the love of their country,” Senator Patrick Leahy said.
The bill’s supporters had asked him to remove the proposal in order to save the legislation.
“I believe in my heart of hearts that what you’re doing is the right and just thing,” Democrat Senator Richard Durbin said.
“But I believe this is the wrong moment, that this is the wrong bill.”
At the centre of the legislation is a provision that would allow the estimated 11 million people living in the US illegally to obtain “registered provisional immigrant status”, six months after the bill’s enactment if certain conditions are met.
That status is the beginning of a 13-year process that would one day allow immigrants to be eligible to apply for a green card.
The bill also includes provisions to strengthen border security along the US-Mexican border, using additional agents and drones.
The president of the powerful AFL-CIO union group, Rich Trumka, attacked the last-minute deal allowing an increase in the number visas for hi-tech specialists as “anti-worker”.
But he said organized labor would continue to support the larger bill.
In the other chamber of Congress, the House of Representatives, immigration legislation is due to receive a hearing in the judiciary committee on Wednesday.
The latest push for reform follows Barack Obama’s announcement last June that the US would allow young undocumented workers who immigrated as children to apply for two-year, renewable visas.
Republicans have increasingly embraced the idea of immigration reform after a large majority of Hispanic voters supported Barack Obama in last year’s election.
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