The Arizona House Land, Agriculture and Rural Areas Committee unanimously approved a bill allowing the industrial production of hemp.
Current federal law allows states to permit the cultivation of hemp.
Backers of the bill said it will boost the state's agricultural economy.
"It uses nine times less water than cotton," said Sen. Sonny Borrelli, R-Lake Havasu City, bill sponsor.
"This will help our cotton growers to be able to rotate in another crop. They only get one planting a year of cotton, this can be planted once a year and at least four cuttings," Borrelli said.
Borrelli also stressed that while hemp is indeed related to marijuana, it is not a drug.
"This is rope. It's not dope. You can smoke a whole bale of this stuff. You are not going to get high on it," he said.
Hemp has a number of industrial uses including rope, clothing, and lotions.
The bill was approved by the Senate in February. It still needs a vote in the full House.