The UK will write off its share of debts owed by the world's poorest countries, Gordon Brown is set to announce on Sunday.
Africa's development goals are not being met
The Chancellor will encourage other rich nations to do the same in a bid to lift the burden of debt repayments from Third World nations.
The UK holds about 10% of the total debt owed to the World Bank and other development banks.
Mr Brown's initiative has been welcomed by aid agencies.
His move will put pressure on other major creditors such as the US, Japan and Germany to follow suit at meetings of the IMF and World Bank next week.
France and Canada are already understood to be planning similar announcements.
Mr Brown currently holds the chair of the IMF and has long promoted policies to solve the international debt crisis, including 100% relief on bilateral debt owed directly to the UK by heavily-indebted countries.
His announcement will come in a speech at St Bartholomew's Church in Brighton as part of the Vote For Trade Justice event ahead of the Labour Party conference.
Treasury sources confirmed that Mr Brown will call for the international community to provide up to 100% relief of multilateral debt.
Brown plans to write-off debt
And he will argue that rich countries should provide extra cash to fund the relief rather than paying for it from existing aid budgets or running down support for international institutions.
Campaigners believe his initiative, for which £100m a year has been put aside, could mark a turning point in efforts to lift the burden of debt on the developing world.
It would free Third World governments to devote a higher proportion of their budgets to health, education and economic development.
Adrian Lovett, Oxfam's campaign director, told BBC Radio 4'sToday programme on Saturday: "This is Gordon Brown at his boldest.
"It's a welcome step. The key thing is firstly that we get the full details of this announcement but that also he persuades the other leading countries to do the same thing.
"If we get that, it could be a huge step forward.
"It would be great to get this issue in the past and move on to deal with other issues facing these poorest countries."
Lucia Fry, senior policy advisor at VSO, said: "VSO welcomes Gordon Brown's move to cancel the UK's proportion of the debt owed to the World Bank by heavily indebted poor countries.
"And echoes his call to fellow G7 members to do the same.
"While a 10% reduction in this figure is welcome, it will not be until there is full debt cancellation that achievement of these goals can be anywhere near realistic.
Peter Hardstaff, of the World Development Movement, welcomed the news but said Mr Brown should go further.
He said: "Most importantly he must drop the free market measures imposed as a condition of debt relief on developing countries.
"These conditions not only delay debt relief for months or even years but have been shown to actually hurt developing countries and increase poverty."
The UK will also continue to call for the debt payments owed to the IMF to be funded through the more efficient use of IMF gold reserves in a way that would not affect the gold price.