Students from low-income families are to get bursaries worth up to £13,000 from Oxford University from 2006.
The university wants to attract more students from poorer families
All those whose parents earn less than £16,000 a year will be eligible for £4,000 in the first year and £3,000 for every year after that.
Oxford currently takes 3% of its students from this income group but hopes this "will gradually increase".
It said the bursaries would make it the "most affordable place" in the UK for talented, but less well-off students.
The least well-off already get state maintenance grants of up to £2,700 a year.
This bursary would mean up to £13,000 more for those on a four-year course or £10,000 for those on a three-year course.
The combined amounts, the university said, would cover estimated total living costs of £5,700 a year, plus £1,000 start-up costs in the first year.
A sliding will be put in place for all students whose families earn below £33,500 a year. These represent about one in five of the university's current intake.
Living costs are estimated to be £5,700 a year
Oxford's vice-chancellor, John Hood, said: "They offer a golden opportunity to every talented young person who was previously deterred by cost from applying to Oxford.
"It was with this in mind that we have created this generous and highly inclusive scheme as we remain determined that those with the greatest academic potential, regardless of their financial circumstances at home, should believe that Oxford is the place for them."
Oxford will charge the full £3,000 a year for all courses under the government's plans to introduce "variable" fees from 2006.
As these will no longer be charged "up-front", students from poorer backgrounds - who did not spend more than £5,700 a year - would face no costs from their own pockets until loans were repaid after graduation, a university spokeswoman said.
Cambridge University has already suggested it might provide bursaries worth £4,000 a year, but has not yet confirmed its plans.