The announcement, made yesterday by the party's leader Charles Kennedy, came as the Labour Government launched its own strategy for education.
Mr Kennedy said a Liberal Democrat government would not fund schools which selected by academic ability.
The move would force England's 164 grammar schools to abandon their use of entry tests at 11 and would prevent all specialist schools from selecting pupils by aptitude.
Mr Kennedy said schools which received public money had a "public responsibility" to improve the service for all children, rather than reduce the opportunity for others.
"The Liberal Democrats have no wish to limit the ability of parents to choose a school for their child," he said.
"Indeed, our claim is that by reducing the number of admissions arrangements, many more children could achieve their preferred choice of school."
The Lib Dems would end testing and instead establish a national assessment and performance unit which would monitor pupils' performance through a sampling system.
Mr Kennedy also outlined the party's "pupil's guarantee" - five promises to children relating to the standard of the teaching they receive, curriculum, classes, assessment and schools.
Primary schools would have one teacher to every 25 pupils; every class would be taught by a teacher trained for that age group and subject; and each pupil would receive a "personalised" curriculum from the age of 14.
The announcement follows the Conservatives' "right to choose" strategy for education, launched last week, which proposed that every school should be allowed to admit pupils for the reasons it prefers, including by academic ability.