UK will also pay 10% of the southern African country’s £1.07bn debt to international lenders such as the World Bank and IMF.
Mr Brown was speaking in Mozambique’s capital, Maputo, as part of a six-day African tour.
On Friday, he signed a debt-relief deal with Tanzania and promised similar deals for 70 other developing nations.
Speaking in Maputo, Mr Brown said he was confident Mozambique could use the money it saved to invest in education, health and infrastructure development.
Britain has promised to pay 10% of the foreign debt bill of the entire developing world under what Mr Brown has dubbed a “new Marshall plan”.