The European country's recently re-elected coalition government led by Prime Minister Xavier Bettel has promised to lift fares on trains, trams and buses nationwide by summer 2019, The Guardian reported.
The new government had also pledged to legalize cannabis, a matter that has sparked public debate.
The move to make all public transport in Luxembourg free is aimed at reducing the country's traffic congestion.
The City is home to just 110,000 people, but it becomes inundated with a further 400,000 commuters, with half of travelling from neighbouring countries France, Germany and Belgium.
Drivers spent an average of 33 hours in traffic jams in 2016, according to a study.
Luxembourg's transport ministry said it cost €491 million a year to run public transport, with ticket sales and subscriptions bringing in €40 million.
Secondary school students can use free shuttles between their institution and their home. As it stands fares are capped at €2 for up to two hours of travel - for a country the size of Oxfordshire, this covers just about every journey. But even this minimal fee will be abolished from the start of 2020.
Georges Merenz, who heads the FNCTTFEL-Landesverband, Luxembourg's main transport union, expressed concerns that the government plan would lead to job losses if nobody was needed to sell tickets.
No decision has yet been taken on what to do about first- and second-class compartments on trains.
The free fares plan is the latest step in encouraging citizens to use public transport. But no other nation has eliminated fares from its entire transport network. It now holds 31 seats in the 60-seat chamber-12 for Bettel's Democratic Party, 10 for the Socialist Workers' Party and nine for the Greens.
On Monday they signed a new accord until 2023.
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