Justice Minister Khishigdemberel Temuujin told the official news agency Montsame that the law was "long anticipated," adding: "There is no significant increase of crimes where countries have no death penalty."
Mongolia's President Tsakhiagiin Elbegdorj is an abolitionist and halted executions after he came to power in 2010, using his presidential authority to commute condemned prisoners' sentences.
"This development is very encouraging and a clear example of positive progress in the fight for human rights for all ― including people convicted of terrible crimes," U.N. rights chief Zeid Ra'ad Al Hussein said in a statement welcoming the abolition.
"We must not allow even the most atrocious acts to strip us of our fundamental humanity," he added.
The move made Mongolia the 105th country to abolish the death penalty in law, the statement said. Another 60 states either have moratoriums in place or have not executed anyone in the last 10 years.
Mongolia has not carried out an execution since 2008, according to rights group Amnesty International, whose East Asia research director Roseann Rife said: "The death penalty is becoming a thing of the past across the world."