The bags, which are made from unbleached, biodegradable cotton and are hand washable to prolong life, will initially go on sale in 100 stores.
The grocer expects the cotton bags to eventually replace the 3.5 million plastic bags for life it sells each year.
Normally 99p, the new bag for life will be 79p during Fairtrade Fortnight, when the Co-op will be reducing the price of all fair trade products by 20 per cent.
The bags are less harmful to the environment and guarantee a fair price and better deal for disadvantaged Indian cotton growers.
The retailer said it is set to double the number of fair trade bananas it sells, by stocking them in its 3,000 stores nationwide.
The Co-op is also launching a national TV ad campaign, focusing on its quality own-label fair trade wines.
Co-op spokesman Brad Hill said: 'We've supported fair trade from its inception. With more than 3,000 stores nationwide stocking fair trade goods, we are taking the fair trade message to more communities than any other retailer.'