Parliament says the Electoral Amendment Act was a step in the direction as it will broaden the choices that voters will make in elections.
It said as the country marks Freedom Day on Thursday, the new law was a sign of the maturity of democracy.
It said this also showed democracy has evolved over the years.
The new law allows for independent candidates to stand as MPs in the National Assembly or MPLs in the nine provincial legislatures.
The Electoral Commission of South Africa recently said it would be ready to hold elections.
It is expected that the elections will take place early next year.
But the new law came into effect after the New Nation Movement went to the Constitutional Court to demand that independent candidates should be able to stand for elections in the National Assembly and provincial legislatures.
The law only allowed political parties to participate in the national and provincial elections.
Parliament said the enactment of the new law shows the maturity of democracy.
“For the first time since the dawn of our democratic dispensation, individuals who are not linked or associated with political parties will be able to stand for election as candidates in the National Assembly and the provincial legislatures. This is a significant step towards ensuring that more diverse voices and opinions are accommodated in the democratic processes of the country,” said parliament in a statement.
“The introduction of independent candidates in the electoral system will hopefully assist in improving voter turnout, which has been on a steady decline since 1994. The amended Electoral Act will bring major changes to the way South Africans will vote in next year's general elections. It amends the electoral formula for allocation of seats – which will have a bearing on how the Independent Electoral Commission will allocate seats in the National Assembly.
“In the new electoral system in the Act, provinces are defined as distinct constituencies (called regions). The National Assembly is divided into 200 regional seats and 200 compensatory seats drawn from proportional representation lists. Independent candidates can compete for the 200 regional seats,” it said.