The measure, which was passed unanimously, penalises banks that do business with Chinese officials.
It will have to be approved by the Senate before going to President Trump.
Critics say China’s law ends freedoms that were guaranteed for 50 years when British rule ended in 1997.
“The law is a brutal, sweeping crackdown against the people of Hong Kong, intended to destroy the freedoms they were promised,” said House Speaker Nancy Pelosi.
UK Prime Minister Boris Johnson said the passing of the law was a “clear and serious breach” of the 1985 Sino-British joint declaration.
Under this declaration, Hong Kong was handed back to China in 1997, with certain freedoms guaranteed for at least 50 years under the “one country, two systems” agreement.
China said the security law was necessary to stop the type of protests seen in Hong Kong during much of 2019.
And despite condemnation in the West, more than 50 countries, led by Cuba, supported China at the UN this week.
The Hong Kong Autonomy Act imposes sanctions on banks that do business with Chinese officials who are involved in cracking down on pro-democracy protesters in Hong Kong.
Ms Pelosi said the law was an “urgently needed response to [China’s passing] of its so-called ‘national security’ law… which is purpose built to dismantle democratic freedoms in Hong Kong”.
Before the bill was signed, the US had already began eliminating Hong Kong’s special status – halting defence exports and restricting the territory’s access to high-technology products.
Last year, the US had also signed into law the Human Rights and Democracy Act, supporting pro-democracy protesters in Hong Kong.
The UK said it will offer up to three million Hong Kong residents the chance to settle there and ultimately apply for full British citizenship.
Australia is also “actively considering” offering safe haven to Hong Kong residents – with Prime Minister Scott Morrison saying there were proposals that will “soon be considered by cabinet”. (Courtesy BBC)