After an intense and endless debate lasting more than 70 hours, most members of the regional legislature voted in favour of the measure, which has been rejected by conservative religious groups and politic, including former Prime Minister Tony Abbott, reports Efe news.
Alex Greenwich, a lawmaker from an independent group that pushed the bill, thanked his colleagues for their support for what he termed as a historic reform.
In addition to decriminalizing abortion, the new rule allows women to voluntarily terminate their pregnancy until the 22nd week of gestation under the supervision of a registered physician.
In the case of aborting after that period, the woman must obtain the consent of two doctors.
The previous law in NSW, dating back to the early 20th century, only allowed termination of pregnancy if a woman's physical or mental health was at risk.
Otherwise, the woman and the doctor who performed the abortion could face imprisonment; however, the law was rarely applied.
With decriminalization in NSW, which last year set up safe zones to prevent women visiting abortion clinics from being harassed by protesters, abortion is legal throughout Australia.
Legislation on the reproductive health of women in Australia is the responsibility of regional governments and laws vary according to states with regard to the permissible period for voluntary termination of pregnancy, the procedure and age, among other factors.
( With inputs from IANS )