The move gives the government authority to act on debts owed by GFG Alliance and secure the future of the operations in the state's mid-north.
Standing orders were suspended in state parliament on Wednesday for the legislation to pass its lower and upper houses.
"GFG is no longer running the steelworks and associated mines," Premier Peter Malinauskas said.
The company has been under intense pressure from the government to pay debts to creditors of the Whyalla Steelworks and the state, which is owed "tens of millions of dollars" including $15 million to SA Water.
Mr Malinauskas, who will visit Whyalla on Thursday with Prime Minister Anthony Albanese and industry minister Ed Husic, said he would announce "one of the most comprehensive industry support packages that this nation has ever seen".
The steelworks had been placed in the hands of an administrator to stabilise operations and explore a possible sale, he said.
"It is unacceptable for such an important critical piece of economic infrastructure for the nation to be in a situation where its ongoing operations are so severely compromised," he said.
"Our mind turns to providing support for the industry and for the people that work within it, to be able to secure sovereign steel making in this country, not a bailout for GFG."
GFG said it was assessing what the announcement meant and was seeking advice on its options.
"Our concern is first and foremost the wellbeing and safety of our employees," the company said in a statement on Wednesday.
The state has appointed KordaMentha as an administrator of OneSteel Manufacturing Pty Ltd, which is part of the GFG corporate group.
KordaMentha will appoint an experienced special adviser to assist the administration and is engaging with parties including steelmaking company BlueScope.
The administrator is fully funded "and that will mean that bills get paid", Mr Malinauskas said.
The move comes after months of uncertainty at the steelworks and reassurances from its chairman, UK billionaire Sanjeev Gupta.
Last Friday, Mr Gupta said a debt settlement deal had been reached with creditors of global financier Greensill Capital, which had advanced billions of dollars in credit to GFG before it collapsed in 2021.
This week, he said the steelworks was turning over $13-$14 million a week and hoped to be breaking even by mid-year.
SA Mining and Energy Minister Tom Koutsantonis said that since 2017/18, GFG had iron ore sales values totalling $7.825 billion from its SA operations and steel sales of $4.8 billion since 2019/20.
"In the same period, we have seen nearly $800 million sent offshore ... this is not a Whyalla problem - it is a GFG problem," he said.
The government's actions have been supported by the two key unions.
Australian Manufacturing Workers Union national secretary Steve Murphy said workers "had long lost confidence in Sanjeev Gupta and GFG to look after the future of the Whyalla Steelworks, and the security of their jobs and communities".
The Australian Workers Union said a structured rescue plan was essential, including strategic government support to facilitate new private investment.
The federal opposition said it supported the SA government's decision to place the steelworks into administration but called for the release of total cost of the support package.
Australia would become "dangerously dependent" on Chinese steel imports if the steelworks were to fail, said a report released on Wednesday by the McKell Institute's SA branch.
"That would leave us completely exposed to coercion from strategic adversaries," chief executive Ed Cavanough said.
