The New York University School of Medicine will provide free tuition for all present and future students, the university announced.
Citing the risk of “overwhelming” debt, it says every student will qualify regardless of merit or financial need.
NYU said financial worries were driving graduates to more lucrative specialities, pushing doctors away from more general positions.
The scholarship covers annual tuition costs of up to $ 55,000 (£43,000).
A study produced by the Association of American Medical Colleges estimated that in 2017 75% of medical students graduated in debt.
The average debt level was $ 190,000 (£149,000).
The university has reportedly been working for more than a decade to accrue the necessary funds to pay for tuition, and hopes to raise a total of $ 600 million (£472m) to make the scholarships available permanently.
Students must still however cover the cost of living expenses and accommodation.
NYU School of Medicine made the surprise announcement at its annual White Coat Ceremony on Thursday – when new students receive a white lab coat as they begin their studies.
In their statement, the university said debt is “fundamentally reshaping the medical profession in ways that are adversely affecting healthcare”.
Graduates move towards higher-paying areas of medicine over paediatrics, primary care or gynaecology due to their “staggering student loans”.
Dr Robert Grossman said that “aspiring physicians and surgeons should not be prevented from pursuing a career in medicine because of the prospect of overwhelming financial debt”.
NYU thanked more than 2,500 supporters who helped bring the scheme to fruition.
It says it is now the only top 10 US medical school to offer such help.