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INDIANAPOLIS (Reuters) - Indiana became the 23rd state to pass anti-union "right-to-work" legislation on Wednesday and the first in the nation's manufacturing heartland, dealing a blow to organized labor by allowing workers to opt out of paying union dues.

Indiana's Republican governor Mitch Daniels signed the legislation into law immediately after it was given final approval in the state Senate, making Indiana the first state to adopt such a measure since Oklahoma did so a decade ago.

Daniels, governor since 2005 and a prominent spokesman for Republicans nationally, said he decided Indiana needed the controversial new law after several businesses decided to locate elsewhere.

"Seven years of evidence and experience ultimately demonstrated that Indiana did need a right-to-work law to capture jobs for which, despite our highly rated business climate, we are not currently being considered," he said in a statement after signing the bill.

Indiana is being closely watched by both major political parties in the presidential election debate over job creation and reviving the U.S. economy.

The Indiana state Senate vote of 28 to 22 was followed by calls of "shame, shame" from members of the public outside the chamber. Opponents of right-to-work call it "union busting" and say it will lower the wages of workers.