The Bill, which President Clinton has promised to sign, updates the 22-year-old Individuals with Disabilities Education Act, which says that children with disabilities should be brought into regular classrooms as often as possible.
"This legislation strengthens and reaffirms our commitment to these children and their parents," Mr Clinton said.
The reforms address the unintended effects of the original law's broad protections for disabled students by letting schools remove those who become unruly and who threaten harm to teachers, other students or themselves.
For the first time, a child whose conduct was unrelated to his disability could be disciplined like any other child, although the school district would remain responsible for educating him. "The reforms will do so much to straighten out the problems we've had to deal with," said Senator James Jeffords, chairman of the Senate labour and human resources committee. "It gives much more flexibility in discipline in the schools. It takes care of the numerous problems that we've had."
Educating the nation's 5.8 million disabled students costs taxpayers $35 billion (Pounds 22bn) a year.