The governor's office announced Tuesday that Haslam signed the measure sponsored by Rep. Craig Fitzhugh of Ripley and fellow Democratic Sen. Lowe Finney of Jackson last week.
The bill directs the U.S. Postal Service to instead donate the books to pre-kindergarten or other programs.
The Governor's Books from Birth Foundation is a partner to the Imagination Library, which was created by country singer Dolly Parton in 1996. The program provides a book every month to children from birth to age 5 at no cost to the family, regardless of income.
The House passed the bill on a 93-0 vote, while the Senate approved its version 31-0.