The refunds will be paid to all graduates who find employment in towns and villages in central and western China, or in other remote areas of the country, it said.
Those who join the army will also be entitled to the payments, it said.
The offer was announced following an executive meeting of the Cabinet chaired by Premier Wen Jiabao held to help graduates find jobs.
The meeting was the second in a month to discuss employment.
The first, on Dec 10, was held to address issues affecting migrant workers.
"China’s employment outlook is grim due to the global financial crisis," a statement issued after the meeting said.
College graduates are a "valuable" human resource, and the government "gives top priority to their employment", it said.
Chen Guangjin, an expert on employment issues with the Chinese Academy of Social Sciences (CASS), said: "This is the first time the government has offered to refund tuition fees, and it shows its determination to stabilize job market."
An earlier report by the CASS said the unemployment rate among new graduates was over 12 percent at the end of last year, leaving 1.5 million without work.
Some 6.1 million new graduates will enter the jobs market this year.
Chen said China’s western and central regions offer many good opportunities for graduates.
But many "would still rather do low-skilled jobs in affluent Southeast China", he said.
According to a recent report in Gaungzhou Daily, over the past six months, more than 2,000 graduates have applied for jobs as domestic helpers in Guangzhou, capital of Guangdong province.
"We get about 500 to 600 applications a month, and more than 90 percent of them are from university students, including master’s students," the newspaper quoted an employee of a housekeeping recruitment agency as saying.
Other employment stimulus measures announced yesterday include:
A lifting of hukou restrictions for graduates who find work outside their hometowns. (Excludes Beijing, Shanghai, Tianjin and Chongqing.)
Encouragement for graduates to seek jobs with SMEs and private companies.
Preferential tax and loan policies for graduates who set up their own businesses.
