The graduation ceremony was the last for the college's School of Extended Education, founded 30 years ago to allow adults with full-time jobs and families to complete their diplomas.
Students average 35 to 40 years old, and most transfer in with some credits.
Among Saturday's graduates was Schwarzenegger's chief of staff, Susan Kennedy, who received her bachelor's degree in management.
Kennedy completed her coursework online and on weekends, while working as many as 80 hours a week running the governor's office.
"This is an extreme achievement, if you think about it," Schwarzenegger told the crowd. "Susan, we have the utmost admiration for you."
The governor commended all the graduates for their determination.
"I know how many of you have heard that it can't be done," he said. "I love doing things that people say are impossible to do .... Everything I have done in my life, there were always people saying it can't be done."
Schwarzenegger owes his own college diploma to adult and extended education programs, he said.
After immigrating to the United States, he began taking classes in English, then added classes in business, history and computers.
"All of the sudden I was full-time at Santa Monica City College," Schwarzenegger said. "It wasn't easy. I was working out five or six hours a day, and I was doing construction -- because at that time there was no money in body-building -- and I was going to school."
"I wanted that degree," he added. "Not finishing was not an option."
Schwarzenegger transferred his credits to the University of Wisconsin-Superior, where he eventually earned a bachelor's degree in business and international economics.
"In nine years, I finally graduated, because of a program just like the one here," he said. "I know what it takes."
Schwarzenegger remained onstage to shake the hand of each of the 268 St. Mary's students who accepted diplomas.
Kennedy -- recognized during the ceremony for her senior project on changing the corporate culture of the governor's office -- also got a high five and a hug, complete with a pat on the shoulder.
St. Mary's officials decided two years ago to shut down the School of Extended Education, or SEED, because of its cost.
"When SEED began, it was really a pioneer," explained college spokeswoman Debra Holtz. "But the landscape has changed dramatically in the last four or five years," with many schools now competing in the adult education market.
St. Mary's will continue to accommodate adult learners through its graduate department, into which the master's in leadership program will be folded, Holtz said.
The college also will sustain its Liberal Education for Arts Professionals program.
Set up to accommodate professional dancers who want to earn bachelor's degrees, LEAP offers classes in San Francisco, Los Angeles and Manhattan.
Reach Sara Steffens at 925-943-8048 or firstname.lastname@example.org.