Last week, eight environmental organisations, including the WWF and Greenpeace, called on parliament to withdraw the bill that would remove a coastal protection zone designed to limit seaside construction.
The government insisted it would be good for business and would protect the environment.
"We have a duty to protect our beaches and at the same time to support the legal tourism businesses that are developing along the coastline and are compatible with the environment," Finance Minister Harry Theoharis told parliament on Thursday.
The aim of the law is to "protect the great richness of the country's long coastline... 13,676 kilometres (8,500 miles)," he said.
However, the left-wing opposition party Syriza said the law threatened the beaches and would hand them over to "private interests".
In a joint statement published last week, the group of NGOs said the bill failed to provide "necessary safeguards and improve the framework for the immediate removal of illegal buildings along the coastline."
The bill, which was put forward by the finance ministry, "is abolishing the already inadequate setback zone of 30 meters (about 100 feet) from the shoreline," the statement said.
"Unfortunately, in Greece, coastal ecosystems are treated as land for housing and tourist development."
The government responded that "improving the management of coastal areas" will be "beneficial to the national economy and environmental protection."
Illegal construction is rampant in Greece where the building industry is one of the main sectors of the economy.
In 2020, the European Court of Justice judged that Greece had violated its obligations under EU law for not protecting some of its vulnerable ecosystems.
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