Senegalese lawmakers say a new bill passed late Tuesday will allow national courts to try Habre, who lives in a villa in Senegal's capital Dakar.
There was heated debate in parliament. Some lawmakers and members of the government are close to Habre, and some have been on his legal team.
Previously, Senegal's judicial system was not competent to try alleged crimes that took place abroad or crimes more than 10 years old.
Victims' associations and human rights campaigners have been campaigning for years to get Habre before a court on charges of systematic killings and torture and ethnic persecution during his eight-year rule in Chad.
A Chadian inquiry, after he was deposed in a coup, blamed him for tens of thousands of politically motivated murders and several hundred thousand cases of torture. Habre says he is innocent of wrongdoing.
In 2006, the African Union asked Senegal to prosecute him.
Souleymane Guengueng, the founder of the Chadian Association of Victims of Political Repression and Crime, says he doubts the trial will take place in Senegal.
He says all that is needed is political willingness and the naming of judges. He says nothing else can stop the trial from starting now.
The recent nomination of Madicke Niang, Habre's former lawyer, as Senegal's new justice minister, makes Guengueng suspect that Habre might not be tried in Senegal.
International advisors have warned the investigation into Habre's rule will be complex and take time to complete.
And there is the issue of money.
Senegal's government has said it needs at least $45 million in aid to be able to finance the trial. France, the former colonial power of both Chad and Senegal, has pledged financial and technical assistance. But other possible donors have said such a huge request would have to be carefully considered.