Legislators voted in favour of amending the existing law to outlaw sales of ivory in Hong Kong, which researchers say is the world's biggest retail ivory market.
The proposal also includes significantly stiffer penalties for wildlife smuggling to deter black market sales.
Under the new law, the maximum sentence will increase to a 10 million Hong Kong dollar (£920,000) fine or 10 years in prison, up from the current top penalty of two years.
Wildlife activists applauded the move, even as Hong Kong moves more slowly on the issue than Beijing.
China is the world's largest ivory importer. Hong Kong, a special administrative region, has lagged far behind the rest of the country.
The Chinese ivory trade has thrived since 1975, with environmental activists saying it has driven illegal poaching.
Such crimes have seen the global elephant population fall by 110,000 in just 10 years to 415,000, according to the International Union for Conservation of Nature.
Mainland China banned ivory sales at the start of the year after shutting all carving factories and shops last March.
British foreign secretary Boris Johnson hailed the move.
He told the Standard: “If China now deprives the ivory poachers of their biggest global market, then the whole edifice of transnational organised crime will be weakened.”
Ministers have announced plans in Britain to impose a ban on domestic ivory sales which would cover items of all ages.
British soldiers have been deployed to train anti-poaching teams in several African countries.
Additional reporting by the Press Association
