The governor of California, Jerry Brown, has signed into law legislation allowing illegal immigrants to receive state aid to attend college.
Supporters of the California Dream Act, as it is called, say it will benefit the state economically.
However, critics argue that it condones entry into the US without proper documentation.
About 2,500 students are expected to qualify for grants under the new legislation.
Governor Brown, a Democrat, said the law would benefit the state by giving top students a chance to improve their lives and, he said, "the lives of all of us".
But, in a state with a huge immigrant population, critics say the law encourages the illegal immigration by granting access to state resources previously reserved for legal residents.
Opponents of the law add that it should not have been passed without major overhaul of America's immigration rules.
California's last governor, the Republican Arnold Schwarzenegger, refused to sign the legislation.
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