The law, approved by President Thein Sein on Friday, had gone back and forth between the legislative and executive branches since March in a tussle involving a government eager to attract foreign investment, tycoons determined to protect their monopolies, and small businesses keen not to be shut out.
Thein Sein took office in March 2011 at the head of a quasi-civilian government that brought almost 50 years of military rule to an end.
He has undertaken economic and political reforms that have persuaded Western countries to suspend sanctions and prompted an upsurge of interest in the country from multinational firms, which see potential in Myanmar's abundant resources and a primitive, low-cost economy bordering India and China.
Most major firms have been waiting to see the new law before committing significant funds.
The details in Myanmar-language state newspapers said joint ventures between foreigners and Myanmar citizens or the government would be permitted with any stake ratio agreed between the partners.
Foreigners can still own 100 percent of businesses without the need for a local partner, as in the previous law dating from 1988. But there could be restrictions in some areas.
A previous draft had said foreigners would only be able to hold a maximum 50 percent of a firm in certain sectors deemed sensitive, including agriculture, and that foreigners would have to hold at least 35 percent of any start-up joint venture.
A parliamentary source told Reuters this week that additional regulations covering the restricted sectors could follow later.
One article of the new law says the Myanmar Investment Commission can allow foreign investors into the restricted sectors with the approval of the government, in the interests of the people and the country.
Under the new law, foreign investors can lease land from the government or from authorized private owners for up to 50 years, depending on the type and size of the investment, and the deal can be extended twice, for 10 years each time.
The old law did not define land lease periods but in practice contracts tended to cover 30-year terms, extendable for two periods of five years.
Foreign firms may be entitled to a tax holiday for the first five years of operation and other forms of tax relief may be available depending on the investment, if deemed in the national interest. The old law allowed for a three-year holiday.
Foreign manufacturing companies may be entitled to tax relief of up to 50 percent on profits made from exports. Tax exemption or relief can be granted providing it is reinvested in the business within one year.
The new law states that output can be used for "both export promotion and import substitution". The old law stressed export promotion.
Like the old law, the new legislation guarantees that an enterprise formed under this law will not be nationalized during the contract term or its extension.
A previous version had raised concern by also saying that, if a company were nationalized in the public interest, compensation would be offered. This clause has now been dropped.
However, one clause says an enterprise allowed under the law will not be stopped "without sufficient reason" before the contract expires.
As under the old law, foreign investors will be entitled to withdraw capital on expiry of the contract in the foreign currency the original investment was made in.
The new law says it supersedes the old one enacted in November 1988 and that foreign firms who set up business under the old law would now be governed by the new legislation.
(Writing by Aung Hla Tun and Alan Raybould; Editing by Sanjeev Miglani)