The measure adds to a crackdown against a protest movement in Hong Kong, calling for greater democracy.
China's actions in recent months have prompted accusations Beijing is eroding the autonomy it promised when the former British colony was returned to China in 1997.
The tightening restrictions have further strained relations with governments in Washington, the UK and Europe - with trade, technology and the party’s treatment of ethnic minorities already ramping up tensions.
The National People’s Congress (NPC) voted 2,895-0, with one abstention, in support of the plan to give a pro-Beijing committee power to appoint more of Hong Kong’s lawmakers, reducing the number elected by the public.
NPC members, who are appointed by the Communist Party, routinely endorse party plans by unanimous vote or overwhelming majorities.
China's president Xi Jinping sat on stage with other leaders as they cast votes electronically in the cavernous Great Hall of the People.
The NPC has no real powers but the party uses its annual meeting, the year’s highest-profile political event, to showcase government plans and major decisions.
The NPC also endorsed the ruling party’s latest five-year development blueprint.
The plan outlines the direction China intends to move in over the coming years - this time is includes stepping up efforts to transform the country into a more self-reliant technology creator.
What is the latest power grab in Hong Kong?
Under the changes in Hong Kong, a 1,500-member Election Committee will pick the territory’s chief executive and an unspecified "relatively large" number of members of its 90-seat legislature.
Committee members would come from five segments of society, including business and political figures.
That would give pro-Beijing forces more influence than a popular vote would.
Hong Kong news reports suggested the committee would also pick one-third of the members of the Legislative Council, or LegCo, the governing body in the territory.
Beijing wants to see "patriots ruling Hong Kong," the premier said.
He said the changes would "safeguard national security" in the territory and support "prosperity and stability."
How has the UK reacted?
Foreign Secretary Dominic Raab said the move is "contrary to the promises made by China itself" about Hong Kong.
He said Beijing is trying to "hollow out" space for democratic debate.
"This can only further undermine confidence and trust in China living up to its international responsibilities and legal obligations, as a leading member of the international community," Mr Raab said in a statement.
The UK has already offered up to three million Hong Kong residents the chance to settle in Britain and apply for citizenship - a move made in response to the continued erosion of freedoms in the territory.
In response, China said it will no longer recognise the British National (Overseas) passport, the travel document being offered to Hong Kong residents as a way into the UK.
How have leaders in Hong Kong reacted?
Hong Kong's leader, Carrie Lam, welcomed the change and said in a statement it will allow the territory to "resolve the problem of the LegCo making everything political in recent years and effectively deal with the reckless moves or internal rift that have torn Hong Kong apart."
Last year, the party used the NPC session to impose a national security law on Hong Kong in response to the protests that began in 2019.
Under that law, 47 former legislators and other pro-democracy figures have been arrested on subversion charges that carry a possible maximum penalty of life in prison.
Ms Lam has faced criticism for her perceived willingness to bow to pressure from China's leaders.
"The Hong Kong people will be disenfranchised" under the latest changes, said Emily Lau, a former Hong Kong legislator who opposes the latest move.
"Beijing wants to exert very tight control," she added.
"It’s not democracy."
Ms Lau said concerns expressed by some Chinese officials about a possible attempt to overthrow the government are overblown.
"Hong Kong people are not going to have independence or overthrow the government. No way," she said.
"What they should do is engage, listen to the voices of Hong Kong people so we can have a dialogue and reach a consensus on how to move forward, instead of just coming down on us like a ton of bricks."