The legislation cleared the Senate on a vote of 64-30. It passed the House last week, but supporters were shy of the two-thirds majority needed to override President Bush's promised veto.
Six senators did not vote on the bill: Democrats Hillary Clinton, Chris Dodd, Barack Obama and Ron Wyden, and Republicans John McCain and John Warner.
"We're convinced that the president has undermined an effort to protect children," Senate Majority Leader Harry Reid, D-Nev., said shortly before the vote.
The White House is holding firm in its opposition to the bill in its current form, which it describes as having "major flaws."
"Like the previous bill, this bill also shifts children with private insurance onto the government rolls, uses taxpayers' dollars to subsidize middle class families, and raises taxes," says the White House, in a statement issued after the Senate vote. "It does all this while costing even more over the next five years than the version the President previously vetoed."
"Whatever the Administration's policy differences with Congress, the President strongly supports reauthorizing SCHIP," the statement continues. "Congress should address the serious flaws in this bill and produce legislation that puts poor children first and does not raise taxes. To relieve the minds of parents and governors, this program should be extended soon so that poor children do not lose health care because of partisan politics."
Sen. Mitch McConnell of Kentucky, the Republican leader, predicted there eventually would be an agreement that all sides could embrace. "I think we are going to be able to get this worked out after we get over the skirmish of the last couple of weeks," he said.
In a situation of bewildering political complexity, Republicans dictated the decision to pass the legislation speedily. It appeared their goal was to short-circuit attempts by supporters of the bill to reach a compromise that could attract enough votes in the House to override Bush's veto.
Attempts by Reid to delay final passage of the bill until next week or longer drew objections from the GOP.
"I believe a deal is within reach," said Sen. Max Baucus, D-Mont., the chairman of the Senate Finance Committee, a participant in meetings with two senior Senate Republicans and several members of the House GOP.
Baucus said the negotiations would resume next week.
The veto-threatened measure would add an estimated 4 million beneficiaries to an existing program that provides coverage for children from families who earn too much to qualify for Medicaid but cannot afford private insurance. The program currently provides benefits to roughly 6 million children.
At a cost of $35 billion, the bill would be paid for through an increase in tobacco taxes, including a 61-cent rise on a package of cigarettes.
President Bush vetoed an earlier children's health bill this fall, and Republican critics said it failed to give a high enough priority to covering poor children, marked a Democratic attempt to expand government-run health care, and did not take sufficient steps to prevent the children of illegal immigrants from receiving benefits.
Democrats failed to override his veto on a vote of 273-156, 13 short of the two-thirds majority they needed.
In response, Democrats launched a replacement measure, incorporating changes they said were designed to meet Republican objections to their first offering.
But President Bush dismissed those efforts this week, telling a business audience, "If Congress sends this bill back to me, I'm going to veto it again." He predicted his second veto would be upheld.
A day earlier, the president told House Republicans in a private meeting that he would veto any measure that raised tobacco taxes, a significant hardening of the administration's public position on the issue.
Political polls show the children's health issue enjoys widespread support, and Democrats and their allies have moved quickly to exploit it for advantage with television and radio commercials attacking Republicans who opposed the legislation.
The result has been a growing nervousness among House Republicans looking ahead to the 2008 elections. The party's top leaders, Rep. John Boehner of Ohio and Roy Blunt of Missouri, joined the compromise negotiations in recent days.
It is unlikely either of them would support a bill that raises taxes. Rather, officials said their intention was to coax as many concessions as possible from the Democrats so that the next measure would be one that other Republicans could comfortably support.
As part of their effort, House Republicans presented a proposal several days ago that requires a 90-percent signup rate for the poorest eligible children before a state can expand coverage.
According to a description of the proposal made available to The Associated Press, no adults could be covered beginning Oct. 1, 2008, except for pregnant women, although any adults currently receiving benefits could be transferred to Medicaid.
All applicants would be required to stipulate that family assets did not exceed $1 million. Anyone seeking coverage would have to provide a birth certificate as proof of citizenship, a provision designed to bar illegal immigrants from receiving benefits.
The proposal from House Republicans made no mention of the tobacco tax increase.