The measure, passed in the early hours, is the latest in a package of laws rushed through by the National Assembly to entrench President Hugo Chavez's self-styled socialist "revolution" before a new parliament is sworn in next month.
The students say the law gives too much power to the government, aims to promote socialist ideology and will be used to crack down on autonomous universities that have long been centers of opposition to the president's leftist agenda.
In the latest of a string of minor protests against the new laws, about 500 student demonstrators converged in downtown Caracas. Some waved signs reading: "We will not obey your law!" and "I'll swap Christmas for freedom."
They were confronted by National Guard troops in helmets and riot gear, and clashes briefly blocked a major highway, Reuters witnesses said. A photographer from another news agency was hurt when he was hit in the head by a rock.
Elsewhere, student supporters of Chavez celebrated the passing of the measure, stringing up a copy of the old university law and beating it with sticks.
The outgoing National Assembly, which is dominated by Chavez loyalists, has passed a raft of legislation in recent days including bills making it easier for the government to nationalize banks, police criticism on the Web, and prevent lawmakers from voting against their own parties.
Most controversial among those was an "Enabling Law" that gave Chavez the power to rule the continent's biggest oil producer by decree for the next 18 months, taking him to within six months of the next presidential election.
"This was a predawn ambush by 100 people who intend to govern the lives of more than 20 million Venezuelans," the rector of the Central University of Venezuela, Cecilia Garcia, told local media, referring to the 3 a.m. vote on the new law.
An opposition coalition that won about half the popular vote at a legislative poll in September is due to take 40 percent of seats in the next Assembly beginning on January 5.
It has accused Chavez of launching a "coup d'etat" by bypassing the incoming parliament and urged peaceful protests.
He rejects allegations he is using the new laws to usher in Cuban-style Communism. The government says the university law reform was essential to develop the country's higher education system and involve grassroots groups in decision-making.
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