Operators agreed to run the trams through the night for the first time since the network began running in 2014.
And up to 4000 passengers will be able to use the special five-hour service, which will start on the stroke of midnight.
Extra staff will be brought in to work on the trams and at tram stops to ensure the smooth-running of the extra service, which will run between Shandwick Place and Edinburgh Airport every 20 minutes.
Organisers expect the service to be used by people heading home or to hotels on and around the tram route.
They are urging people travelling into Edinburgh for the festivities to consider leaving their vehicle at the park and ride site at Ingliston, which has its own tram stop.
The tram service, which is unable to operate on Princes Street on Hogmanay, has been halted between Haymarket and the airport before midnight in the last two years.
Its operators faced criticism over the new service in 2014 when it emerged that the trams would not be operating any later than its normal last service at 11.30pm during the Edinburgh Festival.
However this year it agreed to run trams as late as 1.10am to accommodate crowds leaving events like the Fringe and the Tattoo.
The tram service will complement the free Lothian Buses services which run from just after midnight until 4am on New Year’s Day.
Al Thomson, director of Unique Events, said: “More and more people have been using the free buses - they carried around 18,000 people home last year.
“We’ve found that a lot of people stay out near the airport because there is no accommodation available in the city centre.”
George Lowder, chief executive of Transport for Edinburgh, the parent company of Lothian Buses and Edinburgh Trams, said: “With so many additional visitors coming to the capital we are keen to help both tram and bus passengers travel safely by offering a free late-night timetable that means they can make the most of what’s on offer.
“We expect thousands of locals and tourists to make use of the free service, making sure everyone’s night ends well.”
Lea Harrison, general manager of Edinburgh Trams, added: “It’s important to us that everyone who comes to the capital for ‘the bells’ is able to make the most of their night and that’s why we’ve decided to help by offering this extended free service.”