The move allows the government to act on millions dollars in debts owed by GFG Alliance and secure the future of the mid-north operations.
Standing orders were suspended in parliament on Wednesday for legislation to pass the lower and upper houses.
"GFG is no longer running the steelworks," Premier Peter Malinauskas said.
GFG has been under intense pressure from the SA government to pay debts to creditors of the Whyalla steelworks and the government, including $15 million to SA Water
"For months, my government has been carefully planning a strategy to address the challenges unfolding at the Whyalla steelworks," the premier said.
"Throughout that period, we gave GFG every opportunity to make good on its promises and to bring creditors back into terms. It has failed to do so."
"So today, we have acted. GFG is no longer running the Whyalla steelworks and associated mines."
The steelworks is now in the hands of an administrator to stabilise operations and explore a possible sale to a new owner.
The state has appointed KordaMentha as an administrator of OneSteel Manufacturing Pty Ltd under section 436C of the Corporations Act 2001.
OneSteel is part of the GFG corporate group and is the legal entity that owns and operates the Whyalla steelworks and associated mines.
KordaMentha has advised the state government it intends to appoint an experienced special adviser to assist the administration and is engaging with parties including BlueScope.
"This is a significant step, and one we do not take lightly," Mr Malinauskas said.
"But it is a necessary one to secure the long-term future of Whyalla."
The move comes after months of uncertainty at the steelworks, and reassurances from its chairman, UK billionaire Sanjeev Gupta.
Last Friday, Mr Gupta said a debt settlement deal had been reached with creditors of global financier Greensill Capital, which had advanced billions of dollars in credit to GFG before it collapsed in 2021.
This week, he said the steelworks was turning over $13-14 million a week and hoped to be breaking even by mid-year.
The company announced in January that the plant had cast its first steel following a four-month shutdown that halted production and cost the company millions.
Opposition Leader Vincent Tarzia said the government was in chaos and Mr Malinauskas was scrambling because he had allowed the situation to spiral.
"The government has known the full extent of this issue for over six months, and now at one minute to midnight, he is securing his position, leaving families and businesses in Whyalla on the brink," Mr Tarzia said.
"Peter Malinauskas has just fired a cannonball through the heart of the South Australian economy and left a mess for future generations to clean up."
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