Outgoing Gov. Gray Davis signed the bill enacting the measure, which had been a key goal of gay rights groups.
Geoff Kors, executive director of Equality California, called the move "incredibly significant."
"There are a lot of businesses that want state contracts, and in order to be eligible, companies will now have to give equal benefits," Kors said.
In 1996, San Francisco became the first jurisdiction in the country to adopt such a requirement, prompting numerous companies to offer benefits to domestic partners, Kors said. Other cities have since followed suit, and California is the first state to approve such a law, Kors said.
The measure narrowly cleared the Legislature earlier this year, passing the Assembly with the minimum number of votes needed.
At the time, Democrats described the measure as a victory for fairness and civil rights, while Republican opponents said it would trample the rights of employers who objected to gay relationships.
Davis signed the measure Sunday as he considered dozens of bills sent to him by the Legislature. He faced a midnight deadline to act on the measures.
The governor, who was recalled by voters Oct. 7 but will remain in office until the results become official, had tried to appeal to California's large gay community earlier this year in an attempt to increase public support and keep his job.
Davis already has approved a bill giving domestic partners most of the rights and responsibilities of married couples.
The bill regarding state contracts was the other major gay rights bill passed by the Legislature this year, and gay rights groups had urged Davis to sign it even though he has been recalled. Gov.-Elect Arnold Schwarzenegger, a Republican, had asked Davis to sign no more bills before leaving office, but has acknowledged Davis' right to do so.
The new law will apply to contracts worth $100,000 or more, and may be waived in emergencies and cases where there is only one bidder.
In 1999, California became the first state in the nation to allow gay and lesbian couples to register as domestic partners.
By Ethan Rarick