The cells will be used to house foreign prisoners who are due to be deported after serving their sentences.
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Denmark has made plans to rent 300 prison cells in Kosovo to accommodate inmates at the end of their sentences.
The cells will be used for foreign prisoners who are due to be deported after their sentences, the justice ministry said.
The Danish government presented the new plan on Wednesday in an effort to curb prison overcrowding.
The project also plans to increase the capacity of the Danish prison system by 326 places between 2022 and 2025.
Last year, some 350 prisoners in Danish prisons were due to be deported at the end of their sentences.
Denmark’s prison population has grown by 19% to more than 4,000 inmates by the start of 2021. According to national statistics, Danish jails are now at more than 100% of their capacity.
During the same period, the number of prison guards in the country people has fallen by 18%.
"We were going to be short of up to 1,000 places in the prison system by 2025," Justice Minister Nick Haekkerup said in a statement.
“With the deal, it is agreed to rent 300 prison places in Kosovo and expand the prison capacity in Denmark by several hundred places.”
Denmark is known for its open prisons that are reserved for inmates serving sentences of less than five years.
Meanwhile, Kosovo currently has 1,642 prisoners at a capacity of 97% -- according to the University of London's World Prison Brief.
Norway and Belgium have previously rented prison cells in the Netherlands.