The bill, which was passed this week and is due to come into effect in January 2009, will give the National Defence Radio Establishment, a Swedish intelligence agency, the right to scan all international communications at will. Currently, the agency has to apply for a court order before intercepting communications.
The bill has caused outrage among privacy campaigners who argue that it infringes civil liberties. Protesters have been standing outside the Swedish parliament handing out copies of George Orwell's novel, 1984.
Google's global privacy counsel has also weighed in. Peter Fleischer said: "By introducing these measures, the Swedish government is following the examples set by governments ranging from China and Saudi Arabia to the US government's widely criticised eavesdropping programme."
Supporters of the bill say it is necessary to help counter the growing threat of terrorism.
The law was passed by a slim 143-138 majority, with some last minute amendments made to appease opposing ministers.
The concerns of Swedish politicians echo those in India, where its Government is demanding access to data transmitted by BlackBerry smartphones.
The Indian Government reportedly believes that BlackBerries are being used to co-ordinate potential terrorist attacks, and wants RIM, the manufacturer of the devices, to give it access to users' emails. It says it might shut down the country's BlackBerry services if RIM does not oblige. RIM says it is technically impossible for it to grant access to users' data.
The UK Government plans to draw together all citizens' phone and internet records into one central database, though a court order will be mandatory for the retrieval of such information.