The move aims to reduce the financial burden on families by expanding a policy of free day care for second-born and subsequent children to first-borns as well.
While many developed countries are struggling with low birth rates, the problem is particularly acute in Japan where the population has been declining for years.
"Japan is facing the crisis of a declining number of children, which isn't going away," Tokyo governor Yuriko Koike said as she announced the plan this week.
"There is no time to spare" to address the problem, she added, echoing warnings from the prime minister and other officials of a looming demographic crisis.
Japanese media said the policy in Tokyo, one of the world's biggest cities with a population of 14 million, is the first initiative of its kind at a regional level in Japan.
Public day care is currently available to working parents in Japan, but the national government is planning to widen access to all households.
Koike also said earlier this month that she wants to introduce a four-day workweek option for government staff in Tokyo as part of a nationwide push to encourage parenthood.
Japan has the world's second-oldest population after Monaco and the country's relatively strict immigration rules mean it faces growing labour shortages.
Koike, a former minister and television anchor who has governed Tokyo since 2016, won a third term in July on vows to boost social welfare benefits while acknowledging challenges facing residents, such as inflation.
