The measure, passed unanimously by the California State Senate, has been called the "yes-means-yes" bill. It defines sexual consent between people as "an affirmative, conscious and voluntary agreement to engage in sexual activity".
The bill states that silence and a lack of resistance do not signify consent and that drugs or alcohol do not excuse unwanted sexual activity.
Governor Jerry Brown must sign the bill into law by the end of September. If he does, it would mark the first time a U.S. state requires such language to be a central tenet of school sexual assault policies, said Claire Conlon, a spokeswoman for State Senator Kevin De Leon, who championed the legislation.
Opponents of the bill say it is politically over-reaching and could push universities into little charted legal waters.
The bill comes amid mounting pressure nationwide by lawmakers, activists and students on universities and colleges to curb sexual assaults on campuses and to reform investigations after allegations are made.
The White House has declared sex crimes to be "epidemic" on U.S. college campuses, with one in five students falling victim to sex assault during their college years.
Universities in California and beyond have already taken steps, including seeking to delineate whether consent has been given beyond 'no means no'.
Harvard University said last month it had created an office to investigate all claims of sexual harassment or sex assault, and that it would lower its evidentiary standard of proof in weighing the cases.
Under California's bill, state-funded colleges and universities must adopt strict policies regarding sexual assault, domestic violence, dating violence and stalking, among other actions in order to receive financial aid money.
No college or university voiced opposition to the bill, Conlon said.
The U.S. Department of Education in May released a list of 55 colleges -- including three in California -- under investigation to determine whether their handling of sex assaults and harassment violated federal laws put in place to ensure equal treatment in higher education.
The Californian institutions on the list are University of California, Berkeley, Occidental College and the University of Southern California.