Workers will have to work longer, at least six months, to get benefits, instead of four currently, and payouts to the highest earners will be gradually reduced under the reform, which left unions furious.
"With this reform, the number of unemployed people should fall by 150,000-250,000 in the coming three years," Prime Minister Edouard Philippe told journalists.
"Far from a pure accounting exercise or cost-cutting logic, this overhaul of the unemployment insurance should create savings and transform the labour market, resulting in 3.4 billion euros in savings," he added.
The savings would benefit the UNEDIC unemployment insurance fund, which is co-managed by employers and unions, but whose debt is guaranteed by the French state.
While imposing tougher conditions for receiving benefits, the overhaul also aims to discourage employers' use of short term contracts, by requiring higher payroll contributions by firms that use such contracts.