Among other things, the legislation no longer requires a person to catch a suspect red-handed, but allows for the apprehension within a reasonable amount of time after a crime has been committed.
"Victims of crime should not be revictimized by the criminal justice system when they attempt to protect their property," Nicholson said.
Nicholson, who said the law would receive royal assent on Thursday, made his comments in Toronto's Chinatown, steps from the Lucky Moose food mart as its owner, David Chen, looked on.
Chen made headlines in 2009 when he chased down and held a repeat shoplifter, only to find himself arrested and charged.
Although he was later acquitted, the case sparked public outrage, even drawing the attention of Prime Minister Stephen Harper.
Nicholson, who said the current legislation was "too limited" in requiring a suspect to be caught in the act of a crime, said the new law does not condone vigilantism as some legal and police groups feared.
"It's in no way encouraging that kind of activity," the minister insisted.
"People have to be very careful in terms of citizen's arrest — there are in inherent dangers involved."
He noted a citizen's arrest can only be made legally if it's not feasible for police to catch the suspect, and it requires people to behave "reasonably."
Police retain the foremost responsibility for maintaining public peace and someone making an arrest must call in officers as soon as practical and turn the suspect over to them, Nicholson said.
The new law, dubbed the Lucky Moose bill, also streamlines and consolidates provisions related to self-defence and defence of property that are scattered throughout the Criminal Code. The complex laws go back to about 1840.
"It was time to reform those laws," Nicholson said.
Someone acting in protection of themselves, family or property won't face criminal sanction provides their actions are "reasonable" under the circumstances, although it may still be left to the courts to determine the boundaries of what's reasonable.
The minister said that's something courts do all the time anyway.