The measure was adopted by 235 votes out of 300 on Wednesday, with Golden Dawn members calling the move “unconstitutional.”
The new law suspends state funding “to a party where the leader … or a tenth of the elected members are under investigation for constituting or participating in a criminal organization.”
This applies to Golden Dawn, whose leader and two other parliamentarians are in custody pending trial on charges of belonging to a criminal group.
In addition, three other of its lawmakers are under probe for various criminal activities. Court documents have linked Golden Dawn to two murders, three attempted murders and numerous assaults.
Witnesses have given testimonies that senior party members were involved in attacks on migrants, extortion and possible arms smuggling.
Last week, the Greek Parliament decided to lift the legal immunity of the six Golden Dawn lawmakers, paving the way for criminal charges against the group.
This comes as authorities began a crackdown on the party following the murder of anti-Fascist left-wing musician, Pavlos Fyssas, on September 18 by a Golden Dawn supporter.
The killing triggered public outrage with a number of protests, forcing Greek authorities to take action against the far-right extremist party.
Golden Dawn rose from a fringe group to win 18 parliamentary seats in 2012 elections, as it voiced widespread anger over immigration and austerity reforms in the debt-stricken country.
Greece has been at the epicenter of the eurozone debt crisis and is experiencing its sixth year of recession, while harsh austerity measures have left tens of thousands of people without jobs.
The country has the highest unemployment in the European Union (EU) as it stands at nearly 28 percent and among the youth the figure is at a staggering 60 percent.
Europe plunged into financial crisis in early 2008. The worsening debt crisis has forced the EU governments to adopt harsh austerity measures and tough economic reforms, which have triggered incidents of social unrest and massive protests in many European countries.