The free service will be funded through advertising revenue thatwill share with the music companies.
Qtrax executives said the company's digital rights management technology will count the number of times each song has been played in order to fairly compensate artists and rights' holders, without restricting consumer use.
The company has focused on ensuring that its network is free of spyware or adware such as pop-ups common on many peer-to-peer networks to improve the customer experience.
"If you want people to come to a legal environment it has to be demonstrably better," said Chief Executive Allan Klepfisz.
Peer-to-peer services, which allow fans to exchange digital media files quickly and easily, have been controversial for media companies because the technology enables illegal distribution of copyrighted material.
Music companies have been badly hit as fans flocked to P2P services like Limewire and e-Donkey to download millions of free songs rather than buy CDs or legal downloads from Apple's iTunes digital store.
The music trade organizations have used litigation with varying degrees of success to try to close down P2P services they argue are promoting piracy.
Klepfisz said the privately held Qtrax will help music companies by allowing fans to achieve a balance between the ease of use of a free P2P service with the need to compensate artists and songwriters.
Qtrax has deals with all four major companies including Vivendi's Universal Music Group, Sony BMG Music Entertainment, Warner Music Group and EMI Group.
To take advantage of the free but legal service, the user will need to download the Qtrax software which displays adverts while the user is searching and downloading songs.
The site will feature special sections including one called "Last Night," in which users can search for newly added tracks from live concerts that were recorded the night before. It will also feature music videos, artist documentaries, interviews, album reviews, and biographies among other features.
Qtrax is not the first service to offer free songs for download with advertising support. Last September,from just one of the major record companies Universal Music. It is still in talks with other labels.