In a decree cited by the official KUNA news agency, Interior Minister Sheikh Jaber Khaled al-Sabah said the amnesty began on September 1 and expires on October 15.
Expats who choose to leave during that period will not pay fines and will be allowed to return, the decree said.
Tens of thousands of foreigners are expected to take advantage of the amnesty.
Those who decide to stay should pay fines to legalise their status. The emirate charges a two-dinar (7.5 dollars) per day fine for expats who live in the country illegally.
Those caught after the grace period expires will be deported and barred from re-entering, it added.
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Kuwait, where some 2.35 million foreigners live and work alongside a million nationals, has given illegal residents similar grace periods in the past.
In July, thousands of Bangladeshi workers staged violent prot