Some 15,000 Peruvians and 2,000 Bolivians will be entitled to full residency permits in what is thought to be Chile's largest such move to date.
Another 3,000 immigrants from Brazil, Ecuador, Colombia and elsewhere in Latin America will also qualify.
Interior Minister Belisario Velasco urged immigrants to come forward.
He said they should not fear reprisals for joining the programme which, he said, was intended to normalise immigration in the country.
Correspondents say there is a significant problem with illegal immigration among South American countries, with very little legal recourse for Bolivian and Peruvian immigrants working in the informal sector.