China will allow couples to have a third child as concerns grow that the country's low birth rate could threaten its hopes of prosperity.
The ceremonial legislature changed the Population And Family Planning Law on Friday, with China among a number of countries facing the consequences of an aging population.
The Standing Committee of the National People's Congress said fines would no longer be given for breaking the earlier two-child restriction.
It also called for new measures in finance, taxation, schooling, housing and employment to "ease the burden on families".
It comes just six years after authorities ended the one child policy, which threatened couples with fines or the loss of jobs if they had more than one child.
That policy, implemented in 1979, was initially hailed as a success by China's authorities who said it had prevented 400 million additional births in the world's most populous country, saving resources and boosting economic growth.
But it also led to a massive imbalance in the sex ratio, as some baby girls were killed or aborted due to a preference for sons.
In 2015, officials changed the law to allow two children per family, as the dangers and costs of an aging population became clearer.
The number of working-age people in China has fallen over the past decade, while population growth has remained low: the 12 million babies born in China last year was down 18% compared with the number born in 2019.
Meanwhile, the working age population fell to 63.3% from 70.1% a decade ago and the number of Chinese over 60 increased by 5.44 percentage points between 2010 and 2020 to 18.7%.
The end of the one child policy initially boosted birth rate but this boost soon faded because many women were still not having children.
China is not alone in facing the consequences of an aging population and falling birth rate - other countries in Asia and Europe are also grappling with the same challenge.
But high-income countries, such as Japan and Germany, can draw on investments and foreign assets, while China relies on labour-intensive sectors such as farming and manufacturing.