The Chancellor has scrapped next week's planned rise in fuel duty as part of a package of sweeteners to help "hard-up" families.
Delivering his Budget in the Commons, Osborne said the coalition government will cut fuel duty by 1p a litre from 6pm tonight and also introduce a "fair" fuel stabiliser.
Osborne said he will delay the inflation-linked rise in duty to next year and will also cancel the fuel duty escalator for the rest of the Parliament in a bid to support "hard-up" families in the UK.
The fuel duty escalator will be removed when oil prices are high and replaced with a fair fuel stabiliser, announced Osborne.
The move to scrap all fuel duty escalators will be subsidised by oil companies paying £2bn a year - providing oil prices remain high, added Osborne.
He said the new fair fuel stabiliser, which will raise an additional £2b, will be funded by a 12% increase on supplementary charges on North Sea oil and gas production from Thursday
Osborne said he has "listened" to the public's concerns over the thorny issue of fuel prices and taken measures to ease such worries.
Fuel duty had been due to increase by 1p a litre above inflation from next week.
The theme of fairness was a central plank of Osborne's Budget - the first since the autumn's spending review - as he pledged to help families who pay taxes but struggle with the daily cost of living.
Staying invested could prove lucrative
Consider lasting powers of attorney
Less environment, more governance threatens to undermine firms' green credentials
Evidence your compliance