By Sarah Toms
BBC News, Manila
The death penalty was abolished in 1987, but reintroduced
As a result the sentences of the 1,200 inmates on death row will be now be commuted to life imprisonment.
Mrs Arroyo said she welcomed the change but insists she is not softening her stance on fighting crime or terrorism.
Mrs Arroyo has been under pressure from the influential Roman Catholic church to scrap capital punishment.
The signing comes as she prepares to head to Rome for an audience with Pope Benedict XVI.
Earlier this month legislators in the Philippines, a mainly Catholic country, voted overwhelmingly to abolish capital punishment. By Philippine standards the bill was pushed through in record time.
Violent crime wave
In a speech Mrs Arroyo said "we yield to the high moral imperative dictated by God to walk away from capital punishment".
Earlier she had assured the public that the end of the death penalty did not mean there would be a soft stance against criminals.
The Philippines is plagued by violent crime with guns readily available and used in even minor disputes. Supporters of capital punishment say they fear the repeal will result in more crime.
The repeal comes just days before Mrs Arroyo visits the Vatican for an audience with Pope Benedict XVI.
Some analysts see the repeal of the death penalty as an attempt to win support from bishops for the president's plan to move to a parliamentary system of government.
Others say Mrs Arroyo is trying to diffuse opposition from the church to the government's efforts to revive mining.
The death penalty was abolished once before in 1987 but was re-imposed seven years later after a rise in crime.
Under that law seven executions were carried out by lethal injection, but in 2000, the then president, Joseph Estrada, ordered a moratorium after strong lobbying by the church, the European Union and human rights groups.
President Arroyo has abolished the death penalty.
Gloria Arroyo, President of the Philippines, has signed legislation abolishing the death penalty. This move comes on the eve of a visit to see Pope Benedict XVI and only two weeks after the legislation was confirmed by Congress. The change in sentencing law will lead to more than 1,200 prisoners having their sentences changed to life imprisonment.

Arroyo has made assurances that "we shall continue to devote the increasing weight of our resources to the prevention and control of serious crimes, rather than take the lives of those who commit them". She was keen to emphasise that her country was not soft on terrorism.

In the Philippines, the death penalty was originally abolished in 1987, but it was reintroduced in 1993. Since then seven people have been executed. Abolition of the death penalty has generally occurred in correlation with increasing democratisation in nation-states around the world. As of 2005, a majority of states (122) were abolitionist, and a minority (73) retained the death penalty.