The local town council is to examine the model which has been hugely successful in Dublin with a view to bringing it to Donegal on a smaller scale.
Costings for the idea, the brainchild of Cllr Gerry McMonagle, are now to be investigated by the council.
But Cllr McMonagle says he has no doubt the idea could be of real benefit to Letterkenny considering it has more than 3,000 students alone at the local Institute of Technology.
The plan received the full backing of councillors at last night’s meeting of Letterkenny Town Council.
“I am delighted that my fellow councillors supported me in what I think is a really worthwhile project.
“Letterkenny has always been a progressive town and I don’t see any reason why we shouldn’t be the first regional town outside of Dublin to introduce such a scheme.
“I have no doubt the demand would be huge because of the students at the LYIT alone nevermind the general public.
“We can see everyday how busy Letterkenny is getting and the amount of traffic that is coming into the town.
“This scheme could be another solution to that problem and reduce the amount of carbon emissions in the town,” he said.
Despite claims that the Dublin bike scheme would never work, the plan has been a huge success with more than 40 bike rental stations across the city.
People can use the bikes instead of taxis to get across the city and then leave them off at another station for a small fee.
Only a small number of bikes have been stolen or damaged and the scheme has been considered one of the most successful in recent years.