Every address in the country will have a new seven character post code by early 2015.
The Government has signed off on a plan to bring in the new easy to remember identifier in the format A65 B2CD with the first three digits relating to the postal district.
Dublin will be slightly different as it will retain its existing postal districts in the first three characters of the codes.
Pat Rabbitte, Communications Minister, said at last Ireland was catching up with a system most countries have had since at least the 1990s.
"I am very glad to announce that in making the move now we have been able to use the technology and systems available today to move to a next generation system," he said.
"The Irish code will be the first in the world to be unique to each individual address.
"There are many benefits, for example, given the prevalence of satellite navigation systems in cars, a driver will simply be able to insert a postcode into their device, rather than a lengthy address and will be provided with the accurate location.
"Similarly this will greatly benefit emergency services such as ambulance drivers to locate destinations for call-outs, which in some instances are life and death situations."
Under the new system, the Government said Ireland will be the first country in the world to have a public database of unique identifiers for every property including individual offices and apartments.
At present in Ireland about 30% of addresses are not unique.
A consortium headed by Capita Ireland will develop, implement, and operate the new postcode system. It will run the postcode under licence for ten years which can be extended at the minister's discretion for a further five years.
Business lobby group Ibec claimed the postcodes have the potential to reduce business costs.
"Having such a unique identifier can reduce costs for businesses through supply-chain and administrative savings. The postcode will benefit not only retailers but also consumers through enabling better use of online services and home delivery," enterprise executive Aidan Sweeney said.
"It has taken ten years to get to this point. Now, there needs to be a significant public awareness campaign around the project to ensure success."
Sean Murphy, Chambers Ireland deputy chief executive, said: "This will greatly benefit business, particularly as it is a vital prerequisite for e-fulfillment which will enable more Irish businesses to embrace the web."