The report, named after Richard Corbett, the UK Socialist deputy who authored it, was approved by members in a vote in Parliament in Strasbourg on Tuesday.
The wide-ranging overhaul was approved by 548 votes to 145, with 13 abstentions.
Under the sweeping changes, MEPs' declarations of financial interests are to be more detailed, regularly updated and checked and former MEPs will required to inform Parliament when they take a new job as a lobbyist.
The code of conduct for MEPs will be strengthened and includes an explicit ban on serving MEPs taking paid lobbying jobs.
Penalties will be stepped up for MEPs who use defamatory, racist or xenophobic language or whose behaviour compromises the smooth conduct of parliamentary business.
To improve transparency, any negotiations between MEPs and the Council with a view to striking a first reading agreement will need a mandate from the full plenary, and not just the relevant committee.
Each political group will be able to put one or two current affairs on the plenary agenda. These debates, says the report, should last at least an hour and concern a topic of major interest for EU policy.
MEPs also adapted the rules to improve the efficiency of parliamentary work. These limit the numbers of written questions, motions for resolutions and requests for roll-call votes.
The overhaul rationalises the number of voting thresholds, reducing them from 37 today to three, a change that could be revised after a year.
The approved changes will enter into force from 16 January and will therefore govern the way Parliament works in the second half of the legislature.
The exhaustive report represents the outcome of two years of work on revising Parliament's rules of procedure.
The European institutions have been rocked by high-profile conflict of interest cases this year, including the high-level appointment of former European Commission President José Manuel Barroso to Goldman Sachs.
But, on Monday, Parliament President Martin Schulz blocked an amendment that would have introduced a cooling-off period for MEPs to prevent them taking new jobs that involve lobbying the European institutions during the period they are eligible for a transitional allowance.
After MEPs backed his proposed revisions, Corbett said, "I am delighted that Parliament has adopted my proposed overhaul of its rules of procedure. These will ensure greater transparency, efficiency and clarity."
However, other deputies were less enthusiastic, with Ukip leader Paul Nuttall saying, "This is an explosively dangerous move by the big groups in the Parliament because it reduces the public visibility of important legislative votes and transfers huge amounts of decision-making power to behind closed doors.
"Though on the surface, a technical report, it will mean that more and more legislation will be fast-tracked without proper public deliberation onto so-called trilogue meetings of the Commission, Council and Parliament."
The newly elected leader added, "There will be less votes in public view, and smaller political groups, most of which are Eurosceptic, will have less ability to make amendments to the laws that impact on peoples' lives. Eurosceptic groups will thus be denied an even playing field and a fair book of rules. This shows federalist contempt for the electorates of Europe."
Philippe Lamberts, joint leader of the Greens group also had reservations.
Speaking at a news conference on Tuesday, he said, "Parliament is quick, and rightly so, to criticise what the Commission and Council do, but it needs to get its own house in order.
"Parliament would be in a better moral position if it adopted more robust rules for the way it works."
Lamberts said the report should have been clearer on the issue of MEPs who seek to take second jobs with "profit making companies."
"Being an MEP really should be a full time job," he said.
He also called for "greater clarity" on the activities of lobbyists.
The Greens put forward a series of amendments, one of which would set stricter rules regarding meetings between lobbyists and MEPs.
The GUE/NGL group has already criticised the report, saying it will adversely impact the influence smaller groups like theirs can have on the EU decision making process.
German MEP and GUE/NGL shadow on the Corbett report, Helmut Scholz, said the new code of conduct was "counterproductive and undemocratic".
"After two years of work by the working group, we've come up with over 1400 amendments but this is simply being waived through without discussion.
"Despite the openness of the working process, it is still unsatisfactory because all of it was overshadowed by a power struggle between the larger and smaller groups," he said.
A Friends of the Earth Europe spokesperson told this website, "Overall, it's not a revolutionary reform, it's even quite disappointing given the length of the negotiations. But it is a timid step forward that shows willingness to improve."
Myriam Douo, campaigner for ALTER-EU said: "The new reforms lack bite, at a time when the European institutions are under more scrutiny than ever. The next European Parliament President will need to take transparency and integrity seriously, and this means tackling conflicts of interest and banning second jobs full stop."
Further comment came from Margarida Silva, campaigner for ALTER-EU, who said: "It is beyond belief that President Schulz would actively choose to block new rules on revolving doors. Parliament has led the calls for a reform of revolving doors rules in the Commission and yet it refuses to apply the same standards to itself."