The referendum asked if students would be willing to pay an extra $8.49 each semester to allow all Chapel Hill Transit Authority buses to operate with no charge for anyone wanting to use the service.
The University would pay 40 percent of the busing costs while the towns of Chapel Hill and Carrboro must agree to cover the remaining 60 percent.
Supporters claim that fare-free busing would save students money and reduce the number of cars on campus.
Student Body President Brad Matthews, the proposal's most vocal supporter, was particularly pleased with its strong student support.
"I'm glad students were receptive. This was the first step to a more involved and more effective transit system," he said.
"Although there's a number of negotiations to go through still, I think the chances are good of this sparking a movement for better campus transit."
Groups such as Think Transit have warned that fare-free busing might make buses more crowded and make it financially difficult for the transit authority to add new routes or extend service hours.
Although the proposal must still be approved by the Chapel Hill Town Council and the Carrboro Board of Aldermen, its broad student support makes its passage more likely.
Both student body president runoff candidates were pleased by the the referendum's support but warned that it might receive more scrutiny before being implemented.