Since 2002 it has been against the law to hunt a wild mammal with a dog, but exceptions have been allowed in some circumstances.
The Bill introduces restrictions intended to minimise the risk of wild animals being caught by dogs.
However, Scottish Labour say the new Bill does not go far enough and will allow hunting with dogs to continue under a licensing system.
Ms McAllan said: “The chasing and killing of wild mammals for sport has no place in modern Scotland, but loopholes in existing legislation have allowed this illegal activity to persist.
“The Hunting with Dogs Bill aims to close those loopholes.
“Protecting wild mammals from cruelty is a priority but it is important to note that foxes can cause significant harm to livestock.
“So, while we work to end illegal hunting and pursue the highest standards of animal welfare, we must ensure that farmers and land managers have access to control measures that are both efficient and humane.
“I am pleased with the progress that the Bill has made so far and I look forward to the stage three debate early next year.”
The Bill has passed stages one and two with a final debate on any amendments still to take place.
Labour MSP Colin Smyth said the current laws are being ignored in letter and in spirit.
He said: “Hunts have shown that they will ruthlessly exploit any loopholes, so our laws must be watertight.
“Instead, the SNP are determined to repeat history by watering down their legislation with an unnecessary licensing scheme.
“We cannot licence cruelty and we cannot let this barbaric sport continue in any form.
“Labour will keep fighting to close this loophole and deliver a real ban on fox hunting once and for all.
“We need to make this year’s Boxing Day hunts the last tally-ho and consign this archaic sport to the history books at last.”