The fee of 75 Danish crowns ($12.1) will be halved in 2006 and removed completely in 2007, the centre-right government said following budget negotiations over the weekend.
The fee has brought around 500 million crowns to the country's coffers annually.
"This will among other things strengthen the foundation for regional airports and lead to the establishment of more low-cost routes and thereby give access to more flights and destinations," the government said in a statement.
Scandinavian carrier SAS and Copenhagen Airports are among companies who have called for the fee to be ended.
SAS said on Monday it expected the removal to boost growth in the low-cost segment, but said it was too early to say by how much.
Denmark owns a 39.2 percent stake in Copenhagen Airports and a 14.3 percent stake in SAS.