The most harsh rules in the US target workers without papers, which, opponents say, will lead to harassment

Pro-immigration groups across the US expressed despair today after Arizona passed the toughest bills in the country which they say are aimed at forcing out hundreds of thousands of Latinos living illegally in the state.

Arizona has long been a flashpoint in the debate over immigration, with tensions heightened by the murder last month of a popular rancher, Robert Krentz, in a remote spot used by groups smuggling people from Mexico to the US.

"The Mexico-Arizona border is out of control," said the Arizona Cattlemen's Association in a statement accompanying a report yesterday that claimed the impact of illegal immigration was so great the state could qualify for disaster relief.

The new bill, passed by the Arizona house of representatives last night, greatly expands the powers of the police in dealing with illegal immigration, including for the first time giving them the right to stop anyone on "reasonable suspicion" they may be an illegal immigrant and arrest them if they are not carrying identity papers.

All 35 Republicans in the Arizona house voted for the bill, while 21 Democrats voted against.

Pro-immigration groups said the laws are unconstitutional and promised to challenge them in court. Their passage was accompanied by noisy demonstrations, for and against, outside the legislature.

Chris Newman, legal director of the National Day Labourer Organising Network, a union-backed organisation, said: "I think it is going to be a disaster. It is the toughest immigration law the country has seen in a generation."

He said he was troubled by the fact that a state was making decisions about a federal issue – especially a state with a poor record on civil rights. "It is the Balkanisation of US immigration policy," he said.

Immigration divides opinion in America, which has an estimated 12-20 million illegal immigrants, mostly Latinos. Arizona has one of the biggest illegal immigrant populations, estimated at half a million.

The US economy is dependent on illegal immigrants to work in low-paid jobs, and law enforcement agencies in many parts of the country turn a blind eye to them.

The fear among law firms supporting illegal immigrants is that the new bill will lead to racial profiling, with its powers used to harass anyone who looks or sounds Latino. At present, police are not allowed to ask anyone if they are an illegal immigrant, and can only raise this if investigating another crime.

Under the new laws, anyone the police suspects of being in the country illegally can be asked to produce an alien registration document, such as a green card, that allows non-citizens a right to work, and could face a $500 (£320) fine if they fail to produce one.

This will be accompanied by a crackdown on employers who take on day labourers, who often stand at specific street corners in the hope of being offered work. The new legislation makes it a crime to pick up someone if the driver "knows or recklessly disregards the fact that the alien is here illegally".

Newman said that part of the legislation was the most obviously unconstitutional, denying a person freedom to seek work.

President Barack Obama, who on the campaign trail said it was not realistic to deport millions of illegal immigrants back to their own countries, has promised to introduce legislation to provide illegal immigrants with a route towards citizenship – though the timetable is slipping.

Now Arizona's legislature has opted to take matters into its own hands.

The bill has a number of measures aimed at making life so difficult that Republican legislators hope it will deter illegal immigrants from either making the crossing across the Mexican border or, if they do, lead them to choose another state.

The bill still has to go back to the Arizona senate, but this is a formality. It will then go to the Republican governor, Jan Brewer, to be signed into law.

The legislation is a problem for Arizona senator John McCain, who is fending off challenges from rightwingers as he seeks re-election in November. McCain joined forces with the late Democratic senator Edward Kennedy to try to push through legislation to reform immigration laws. The move, which eventually failed, was opposed by many Republicans.