The amendment is the latest change to the financial hub's legal and political landscape as China works to snuff out dissent in Hong Kong following huge and at times violent democracy protests in 2019.
Hong Kong was once lauded for its common law traditions that allow international lawyers to work in its legal system.
But under a national security law imposed by Beijing in 2020, the Hong Kong government has said their participation brings "potential risks".
"Parties involved in a case are never entitled to a right to choose an overseas lawyer," Hong Kong's Secretary for Justice Paul Lam said Wednesday.
Exceptions can be granted by Hong Kong's leader if their participation "would not be contrary to the interests of national security", the Department of Justice said in a proposal passed by the city's legislature Wednesday.
The change stems from repeated failed attempts by the Hong Kong government to prevent Tim Owen, a prominent British rights lawyer, from defending media tycoon Jimmy Lai.
Lai -- one of Hong Kong's best-known democracy activists -- has been behind bars since late 2020 and is facing further charges of "collusion with foreign forces" under the security law.
Ad hoc admissions of overseas lawyers were previously decided by Hong Kong's courts.
But China's top lawmaking body in December handed Hong Kong leader John Lee the authority to screen applicants.
Beijing's decision came after three Hong Kong judges backed Lai's request to be represented by Owen, repeatedly ruling against the government.
Lawmaker Ambrose Lam said Wednesday he was disappointed the amendment allowed foreign lawyers to apply for exemptions.
"Being merciful to the enemies is being cruel to ourselves," he said in the legislature.
Lai's legal team have argued the government's actions violate his rights and have sought to suspend the security case against him.
They have also lodged a judicial challenge against Hong Kong's powerful national security committee and the city's Immigration Department over the decision to deny Owen a visa.
Both cases have been heard and are pending rulings.
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