Only police, fire and emergency workers could be required to live within 15 miles of the city or county where they work under a provision added to the state budget.
The Legislature's Joint Finance Committee on Thursday voted to prohibit any more restrictive residency requirements than that.
Gov. Scott Walker proposed doing away with any residency requirements statewide.
The change would most dramatically affect Milwaukee.
All Milwaukee city and school district employees must live in the city. Milwaukee Mayor Tom Barrett and others strongly oppose removing that.
A vote to remove Walker's proposal in the budget failed on an 8-8 vote. A vote to establish the 15-miles radius passed 12-4 with Republicans in support and Democrats opposed.