The upper house of congress passed the measure by 74 votes to 26. It required 60 votes to pass.
Earlier on Monday, the lower house of US congress approved the same bill following weeks of political wrangle.
It is expected that US President will sign the bill into law following the Tuesday’s vote.
The earlier passage of the bill by the Republican-controlled House came a day before the deadline to lift the debt ceiling, with agreement between Republicans and Democrats over the $2.1 trillion deficit-cutting plan reached over the weekend.
In remarks delivered immediately following his signing of the bill, Obama said that “both parties need to take responsibility for improving this economy”, and emphasised the need for congress to work towards passing bills that created more jobs.
He said that lawmakers need to continue to work towards finding a balanced approach to reducing the deficit, including some adjustments to healthcare benefit plans for the elderly and reforming the tax code so that the wealthy pay more.
“We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession,” Obama said.
The vote in the Senate had been virtually guaranteed to pass the bill, with Harry Reid, the Democratic majority leader, and Mitch McConnell, the Republican minority leader, both backing it.
It passed with support from 45 Democrats, 28 Republicans and an independent. Nineteen Republicans, six Democrats and an independent voted no.
The bill, which contains no immediate tax increases, raises the borrowing limit into 2013, calls for spending cuts spread over 10 years and creates a congressional committee to recommend a deficit-reduction package by late November.
It does not spell out where the spending cuts should be made and instead puts off decisions about which programmes will bear the brunt.
World markets were initially down, despite the news, with the US Dow Jones Industrials bearish for the eight straight day on the back of spreading debt troubles in Europe and a decline in US consumer spending.
On Tuesday, Timothy Geithner, the US treasury secretary, said that it was unclear if the passage of the debt ceiling deal would ensure that the country did not lose its prized AAA rating from international credit ratings agencies.
The Fitch ratings agency retained its AAA rating for the US immediately following the passage of the bill, but more prominent firms Moody’s and Standard & Poor’s were yet to report.
The deal falls short of the $4 trillion in fiscal consolidation that rating agencies had indicated would be sufficient to retain the current rating.