All six to 10 year olds will be given a laptop
Intel has signed the largest ever deal for its child-proof laptop, the Classmate.
500,000 of the specially designed educational machines are being given to six to 10 year olds in Portugal.
Originally intended for the developing world, Intel has shifted its focus in recent months to more mature markets.
It stressed its commitment to supplying the Classmate PC to the developing world and said it had projects underway to use it in 50 countries.
The deal will change the way education works in Portugal, according to Paulo Campos, the Portuguese government's secretary of state assistant for public works.
"It will change the educational system, change the way that students look upon school and how we communicate with parents," he said.
Broadband access in Portugal is still relatively low. Official figures suggest 15% have fixed broadband access and another 16% have mobile broadband.
There are other projects in the pipeline to increase connectivity and PCs to school children aged 10-16, said Mr Campos.
Intel chairman Craig Barrett was in Portugal to oversee the deal and reiterate the chip makers commitment to educational programmes.
"In any environment there is an issue about hardware but there are also issues about connectivity, software, infrastructure and training teachers so they know how to use it," he told the BBC.
"Our philosophy is holistic and the hardware is just a piece of that. There must be local content to go with the hardware," he said.
But the biggest issue he sees is that of teacher training.
Intel had already trained five million teachers to make better use of technology and aimed to train millions more in the coming years said Mr Barrett.
Row with OLPC
Intel's Classmate has made some inroads in Nigeria
Intel's efforts in education have been overshadowed in recent months by a highly publicised row with rivals, the One Laptop Per Child foundation (OLPC), run by Professor Nicholoas Negropronte.
In July 2007 the two rivals decided to join forces but the partnership was short-lived and in the following January, they split.
"Our relationship with OLPC did not last very long because they told us to stop promoting the Classmate," said Mr Barrett.
"It is up to individual countries which educational philosophy they follow. There are now a number of relatively inexpensive machines available," he added.
But he remains committed to Intel's education programme.
"Whenever I talk to a teacher, they tell me that children using PCs get more excited and want to stay in school. They learn faster, are more enthusiastic and successful," he told the BBC.