The new law goes into effect 1 July.
Governor Northam, a Democrat, signed two identical bills, Senate Bill 2 and House Bill 972, creating a civil penalty of no more than $25 for possession of up to an ounce of marijuana, with no jail time.
Virginia House Majority Leader Charnielle Herring, who proposed the House bill, said it was a significant step to combat racial disparities in the criminal justice system.
Current Virginia law states that the possession of marijuana is punishable by a maximum fine of $500 and a maximum of 30 days in jail for first time offenders.
A second offence is a class one misdemeanour, punishable by up to 12 months in jail and a fine of up to $2,500.
The bills were passed by the state legislature in March.
The governor proposed recommendations to the bills which were approved by the state’s General Assembly in a reconvened session.