Some 900 children have been adopted abroad since 2001

The law gives priority to Romanian couples and allows international adoption only as a last resort.

The European Union, which Romania hopes to join in 2007, had pushed for a ban, fearing that the country's adoption system is open to abuse by traffickers.

But the US says the law is a tragedy as not enough Romanians are able to give homes to some 40,000 orphans.

Baby trade

The plight of Romanian children living in appalling squalor in orphanages was one of the abiding images in the immediate aftermath of the fall of the country's dictator, Nicolae Ceausescu, in 1989.

Prospective parents from Western Europe and the US flocked to Romania, offering homes to the many unwanted children born in a country where contraception and abortion had been banned.

Some 30,000 children are believed to have been adopted abroad. The BBC's central Europe correspondent Nick Thorpe says middlemen grew rich in a trade which saw tens of thousands of dollars changing hands.

Romania placed a moratorium on international adoptions four years ago but hundreds of children continued to go to foreign families, many of them in the US.

EU experts helped Romania craft the law, in order to tackle baby trafficking and corruption within the adoption system.

"This law shows that our children are not for sale, that they are better off in Romania," Florin Iordache, an MP for the governing Social Democrat party told Reuters news agency.

Languishing

The law says that children can be adopted abroad only by their grandpartents and only after every attempt has been made to keep them with their own family or place them with another Romanian family.

But the US government has described the restrictions as a "tragedy" for Romanian children, saying too many children are languishing in institutions while a foreign family could be found for them.

The different views of the EU and US over adoption led Romania's Prime Minister Adrian Nastase to say in February that his country had been "ambushed".

The EU has been pressing Romania for years to change its adoption laws and indicated that the country's bid to join the union might be in jeopardy.

President Ion Iliescu is expected to sign the new law which will take effect on 1 January 2005.