The incentive will cover all new bookings made before 31 October for travel through to the end of October 2022.
It covers the cost of all tests required for fully vaccinated travellers heading to Spain and Greece, as well as their islands, and Cyprus through to the end of the summer season.
On the Beach said a typical group of four would save around £200. The offer has also now been extended to those travelling from Wales.
England’s testing rules are due to change from 4 October, with the pre-departure test requirement ahead of people’s return set to be scrapped.
The government has also repeatedly pledged to lower the Day 2 testing standard from PCR to lateral flow.
The devolved administrations in Scotland, Wales and Northern Ireland are yet to confirm their plans, although Welsh first minister Mark Drakeford has spoken out against reducing the Day 2 testing standard from PCR to lateral flow.
On the Beach’s free testing offer will be based on each destination’s specific testing requirement for fully vaccinated holidaymakers.
Tests, provided thanks to a partnership with Collinson, will be ordered automatically upon booking for delivery at least 48 hours prior to departure.
The OTA said its decision to extend its free test offer was based on the firm’s own research, which found nearly a third of travellers decided not to travel in 2021 owing to the cost and hassle of PCR testing.
Chief executive Simon Cooper said testing remained "a significant barrier" to booking, and stressed he hoped the extension of the offer would help restore confidence to travel.
