The move is expected to be a big boost to T-Mobile, which has been losing customers to companies that sell the iPhone.
The announcement came just days after T-Mobile ditched its contract-based plans in favor of selling phones on an installment basis.
T-Mobile, the fourth-largest of the national U.S. phone companies, will charge $100 up front for the iPhone 5, then another $20 per month for two years.
The total monthly cost with service fees starts at $70 per month, a substantial discount to prices offered by bigger companies.
The Associated Press contributed to this report.