The measure gives the city more power to seize land in neighboring towns, and limits the state's ability to block the project.
Before signing the bill, Blagojevich said the expansion of O'Hare doesn't just benefit northern Illinois or one or two carriers, but all of Illinois.
At the bill signing ceremony at O'Hare was U.S. House Speaker Dennis Hastert and Chicago Mayor Richard Daley.
Daley says the bill will allow the creation of an efficient, state of the art airport for the 21st century, adding modernization won't burden local and state residents.
The Federal Aviation Administration must approve expansion plans before work can begin.