The Majlis approved a proposal on Tuesday to phase out subsidies on certain food products redirecting the extra income towards helping the low-income sector of the population.
The bill was passed with 154 votes in favor, 14 against, and 10 in abstention.
"According to the bill subsidies on food products such as wheat, rice, sugar, and oil will be ended gradually in five years. But the parliament excluded medicine subsidies from the bill," the state radio said on Monday, Reuters reported.
Earlier the parliament on Monday approved two articles of the subsidy reform plan that would cut energy subsides and bring prices closer to international market levels, according to the Mehr News Agency.
Lawmakers approved two articles of the bill which would allow the government to adjust energy prices based on the final prices the government pays for them.
The bill needs the approval of the Guardian Council before it can be implemented.
The government wants to increase energy and utility prices and compensate low-income families with direct cash payments.
President Mahmoud Ahmadinejad has argued his subsidy reform bill would help implement justice and remove discrimination, but some critics say the bill may rekindle inflation.