Foreign Minister Villy Sovndal said the withdrawal of Danish troops, numbering about 650, is necessary for Afghanistan to regain responsibility for its security.
The Copenhagen Post reported that after the withdrawal, Denmark plans to support the development of the Afghan police force and give aid for other programs.
Afghanistan will become the largest recipient of Danish aid, the Post reported, receiving an average of $96 million in aid annually between 2013 and 2017.
Development Minister Christian Friis-Bach said Afghanistan must show responsibility in exchange for the assistance.
"The Afghan government will be held to account for their promises of tangible progress in areas such as the respect for human rights, elections and the fight against corruption," Friis-Bach said. "There will be consequences for our development assistance if the Afghans do not deliver on their commitments."