The wage hike will go into effect in two phases: The current minimum of $8 an hour will be lifted to $9 on July 1, 2014, and then to $10 on Jan. 1, 2016.
The governor said it was his "moral responsibility" to give Californians a chance to earn a living wage.
"Our society over the last 30 years … has experienced a growing gap between those who do work at the bottom and those who occupy the commanding heights of the economy," he said.
"This is about the social fabric and harmony of Los Angeles and California," he said. "And the minimum wage will set the floor as the ceiling keeps getting further and further apart."
The wage hike will be a big help to workers such as Oscar Sanchez, 29, who wipes down cars at a south Los Angeles carwash.
Sanchez said he earns about $500 a week, and scrimps to make ends meet. He plans to send whatever extra money he earns to family in Guatemala.
"It will definitely benefit workers like me," Sanchez said. "We can do more for our families."
But the bill, known as AB 10, had faced vocal opposition from many companies.
A coalition of employers, including the California Restaurant Assn. and the California Chamber of Commerce, said small businesses cannot afford to pay more. The coalition also said the new law could backfire by forcing companies to raise prices, cut worker hours or even lay off some employees.