The Cumbernauld-based firm, which also makes Rubicon and Tizer, said it would cut Irn Bru's sugar content from about 10g per 100ml to just below 5g.
It will reduce the calorie count per can from just under 140 to about 66.
AG Barr said the move was part of a "long-standing sugar reduction programme".
It confirmed in a stock market announcement on Wednesday that more than 90% of its portfolio would contain less than 5g of total sugar per 100ml by this autumn.
Tizer is already below that threshold, while the Rubicon carbonates range will all have less than 5g of sugar per 100ml by the middle of this year, the company said.
The UK government plans to introduce a levy on sugary drinks in April 2018.
The Soft Drinks Industry Levy (SDIL) will have two bands in the UK - one for soft drinks with more than 5g of sugar per 100ml and a higher one for drinks with more than 8g per 100ml.
Ministers hope the move will help tackle the nation's obesity problem.
A spokesman for the company said: "Irn Bru will still be made with sugar. We are not removing all the sugar, but we are reducing the amount.
"Having worked on this for some time, we are carefully blending and balancing a mix of sugar, sweeteners and our original and best flavour essence to deliver the great taste of Irn Bru but with less sugar.
"We're doing this because evidence shows that most consumers want to reduce their sugar intake while still enjoying great tasting drinks.
"86% of consumers are concerned about the amount of sugar in food and drink that they consume.
"That said, we have taken the soft drinks sugar tax thresholds into account when determining the levels of sugar reduction, but never compromising on taste."
In the past year, the company has introduced two new drinks - Irn Bru Xtra and Rubicon Spring - both of which contain no added sugar.
Chief executive Roger White said: "Evidence shows that consumers want to reduce their sugar intake while still enjoying great tasting drinks.
"We've responded by significantly reducing sugar across our portfolio in recent years, through reformulation and innovation.
"Today's announcement builds on this progress and we are now expanding our successful sugar reduction plans to include our iconic Irn Bru brand."
He added: "We will continue to respond to our consumers and adapt to their changing preferences, offering great tasting products that are right for this generation of consumers and the next."

Police initially said that business rivalry was a more likely motive for the attack on the Movida bar restaurant outside Kuala Lumpur on 28 June.
They added that two men suspected of involvement had been arrested.
Authorities are increasingly concerned about IS-related attacks as a number of Malaysians have gone to fight in Syria.
"There were elements of IS involvement in the attack," national police chief Khalid Abu Bakar told reporters.
"We found out that the two of them received instructions from one of our own citizens in Syria... to conduct attacks in Malaysia."
There have been dozens of extremism-related arrests in recent years, including 13 Malaysians detained following the latest attack but who police said were not directly connected to it.
Governments across the region have warned of an increased threat from the group.

The cabinet considered an urgent report on Tuesday and voted to remove the section from the pavilion to the seaward end.
The report said because of the risk of further collapse, the council could not wait for consent to begin work, as is usually the case for a listed building.
Work on the "dangerous" structure is expected to take about three weeks.
Parts of the Grade ll pier, which was already closed to the public when it gave way on 1 February, will be saved, catalogued and stored.
Iwan Davies, chief executive of the council, told the meeting: "The dangerous nature of the structure means dismantling it is dangerous."
Up to Â£650,000 has been set aside for the work but councillors were told there was no way of knowing how much it would cost.
AG Barr is to halve the amount of sugar in its leading Irn Bru brand, ahead of a government crackdown on the fizzy drinks industry.
[NEXT_CONCEPT]
Malaysian police have said a blast at a bar last week, which injured eight, was the first attack by the so-called Islamic State group in the country.
[NEXT_CONCEPT]
Part of Colwyn Bay pier is to be dismantled after it collapsed into the sea, Conwy council has decided.