The European nation will become the first country in the world to adopt free public transport.
Commuters need only pay €2 (US$2.20) for up to two hours of travel, which in a country of just 2,590 square kilometres covers nearly all journeys.
The newly re-elected coalition government led by Xavier Bettel plans to waive fares and make the country the first in the world to offer free public transport, the Guardian reports. Children and young people under the age of 20 already travel for free and many qualify for an annual mPass, which costs €150.
Secondary school students are also provided free shuttle services between their places of study and homes.
The country's capital Luxembourg City, suffers from chronic traffic congestion despite being home to just 110,000.
Apart from providing free public transport, Bettel's coalition government also intends to legalise cannabis and introduce two new public holidays.
Around 110,000 people live there but another 400,000 commute in for work every day, while almost 200,000 cross the border from neighbouring France, Belgium and Germany.
Now, from the start of 2020 all tickets will be abolished, saving on the collection of fares and the policing of ticket purchases.
Mr Bettel's Democratic party is to form a government with the left-wing Socialist Workers' party and the Greens after he secured a narrow victory in October. The two-time prime minister promised voters that environmental concerns would be of paramount importance while he remained in office, The Guardian reported.
To the benefit of its people, Luxembourg has adopted a progressive attitude in addressing transportation.
The new government coalition only just scraped through with 31 out of 60 seats in Chamber which might present a challenge when it comes to passing new, out-of-the-box policies and legislation.