The bank will break new ground by allowing customers to borrow up to 97% of the purchase price of homes included in the affordable housing scheme.
Customers for conventional mortgages could, until now, borrow a maximum of 92% of the house price, which forced them to come up with the remaining 8% elsewhere.
The new product will help remove an obstacle faced by many affordable housing borrowers who had struggled to come up with the balance.
Bank of Ireland retail division head Des Crowley said the bank had worked with the Department of the Environment and Local Government, which sponsors the affordable housing scheme, and taken a "flexible and imaginative" approach to its security and lending requirements.
"As the first financial institution in Ireland to enter this market, I am confident that our mortgage offering will make home ownership a reality for many who may not have thought it possible," he said.
The bank will offer the same interest rates on the new product as currently apply to conventional mortgages.
Borrowers will be able to take out variable or fixed-rate mortgages and can also apply for the tracker alternative, which caps the lending rate at a fixed margin above the ECB base rate.
Mortgage terms of up to 35 years will be on offer when the product hits the market early in the new year.
The bank will lend between four and five times the annual income of a single borrower and four-and-a-half times the combined income of joint borrowers.
Borrowers will also be able to take out loans over the €165,000 ceiling that was a condition of local authority lending arrangements.
Speaking at the launch of the product, Taoiseach Bertie Ahern said it would add to the existing range of government schemes aimed at improving access to affordable housing.
Mr Ahern also welcomed the "positive engagement" of the financial sector and said co-operation between the private and public sectors could bring benefits to everyone.
Up to 11,000 new homes are expected to come on the market under the affordable housing scheme in the next three years.
The scheme allows people who satisfy certain income criteria to buy a house at a discount to its market value.