The bill signed late Sunday was among the last of 977 bills that Brown acted on just before a deadline Sunday night.
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At the same time, the Democratic governor vetoed three bills that looked to advance protections for women and signed a measure that could allow for a boost in public parks.
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With Brown's signature on SB179, California joins Oregon in allowing a gender-neutral option on driver's licenses and state identification cards. The legislation also makes it easier for people to change their name and gender on other official documents such as birth certificates.
The Democratic governor also signed a separate measure that allows people in prison to ask a court for a name or gender change.
"I have dear friends in San Diego and around the state who have been waiting a long time for this," said Sen. Toni Atkins, a San Diego Democrat who wrote both bills.
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Amid a growing national conversation about gender identity, California has banned unnecessary travel by state employees doing government work to states deemed hostile to LGBT people and has expanded gender-neutral bathrooms. In response to litigation, the state prison system has paid for an inmate's gender reassignment surgery and adopted policies allowing cosmetics, bras and personal items corresponding to an inmate's gender identity.
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Meanwhile, Brown vetoed several bills that sought to expand rights of women at work and school. One would have guaranteed at least six weeks of full pay for teachers and other school employees who need to take pregnancy-related leaves of absence.
Brown he previously signed other legislation allowing extra pay for teachers who have children and believes further expanding paid leave should be a subject of collective bargaining agreements between unions and school administrators.
He also blocked a bill that would have prohibited churches, religious schools and other religious organizations from firing or disciplining employees for having an abortion, using birth control or receiving in vitro fertilization. Brown said nonreligious employers have long been barred from taking such actions, and the state Department of Fair Employment and Housing should handle any disputes.
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In addition, Brown vetoed a measure that sought to codify guidelines from the Obama administration about campus sexual assault. Some of the guidelines have been rolled back by President Donald Trump's education secretary, Betsy DeVos.
Brown said California has recently taken strong actions to strengthen sexual assault guidelines on college campuses, including a "yes means yes" policy that requires affirmative consent for sexual activity, and he wants to better understand the full impact of those changes.
"We may need more statutory requirements than what this bill contemplates. We may need fewer. Or still yet, we may simply need to fine tune what we have," Brown wrote in his veto message. "It is time to pause and survey the land."
Of the 977 bills approved by lawmakers this year, Brown signed 859, or 88 percent. The rest were vetoed.