Education fees have been one of the most contentious subjects during Zuma's presidency, with violent demonstrations erupting at campuses across the country by students demanding free education.
Zuma will step down as African National Congress party head at the five-day meeting starting outside Johannesburg, but he will remain as national president ahead of elections in 2019.
The announcement on free education could boost support in the tight leadership battle for Nkosazana Dlamini-Zuma, his former wife and apparent chosen successor.
Like Zimbabwe, South Africa needs leadership change, says top ANC official
"Government will now introduce fully subsidised free higher education and training for poor and working-class South African undergraduate students, starting in 2018," Zuma said in a statement.
"This policy intervention will enable government to extend fully subsidised free higher education to youth from well over 90 per cent of South African households."
South Africa's economy has struggled in recent years, and Zuma gave no details how the plan would be funded.
Dlamini-Zuma's main challenger for the ANC top job is deputy president Cyril Ramaphosa, a wealthy businessman and former trade union leader.
The winner will be well placed to be the next president, but the ANC has lost much popularity since Nelson Mandela led it to power in the 1994 election that marked the end of white-minority rule.
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