The legislation, signed by New York Governor Andrew Cuomo late Monday, gives models under the age of 18 the same labour protections as child performers.
It is likely to have a significant impact on casting for catwalk shows and magazine shoots in New York, one of the most iconic fashion capitals of the world.
In an industry that lionises youth and rail-thin figures as the beauty ideal, top models can be scouted at a young age for rigorous international careers.
The new law is the latest attempt to inject regulation into an industry that has courted controversy for eating disorders, racism and sexual harassment.
The bill, which warned that child models are frequently exposed to sexual harassment and lacked financial and education protection, will take effect in 30 days.
The Council of Fashion Designers of America said the changes would greatly impact the casting of models for New York Fashion Week in February.
The legislation limits young models' working hours and stipulates they should leave before midnight on a school night or at 12:30 am local time on weekends.
Designers have to ensure 15 per cent of the model's fee is funneled into a trust account until he or she is 18.
If they miss three or more consecutive days of school, they must also be provided a tutor.
Models under 16 must also be provided a chaperone and a nurse with pediatric experience should be on hand.
Employers or guardians who break the rules will face fines of between USD 1,000 and USD 3,000.
New York State Senators Diane Savino and Jeff Klein, and State Assemblyman Steven Otis who sponsored the bill, welcomed the new law.
"We have brought an end to the rampant exploitation and sexual abuse of child models by giving child models the critical protections," Savino told a news conference.
The Model Alliance, which campaigns to improve working conditions in the near unregulated industry, said it was "thrilled" by support for the new law.
Model and actress Milla Jovovich, who was scouted at the age of 11, was among those who spoke out.
"It seems incredible that young kids in the modeling industry haven't had equal rights to other child performers until now," she said in a statement yesterday.