The amalgamation of the University of Adelaide and University of South Australia will create one of the largest tertiary institutions in Australia.
The merger was ensured after the government secured the support of two key crossbenchers, SA Best MP Connie Bonaros and One Nation's Sarah Game.
The pair pledged their votes in the upper house to pass legislation to create the amalgamation after Labor agreed to amend its bill.
The new Adelaide University will give young South Australians higher quality education that gives them the ability to get better jobs with better pay, Premier Peter Malinauskas said.
"This is a historic agreement that has now got the ability to set South Australia up to have one of the finest universities not just in the country but also anywhere in the world," he told reporters on Wednesday.
"We don't want to see young South Australian students going to the University of Melbourne, go to the University of Sydney to get an educational outcome they deserve here home in South Australia."
The government agreed to increase a $100 million student support fund for the new university to $120 million as well as a $40 million fund for Flinders University.
A parliamentary report into the merger delivered on Tuesday found the move would improve the economic and social prosperity of the state.
But shadow education minister John Gardner and Greens education spokesman Rob Simms dissented with the majority view, expressing concerns about the transparency of the process and potential negative impacts to the broader tertiary education sector, including for Flinders.
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