The Amazon Local Register includes a card reader that attaches to a smartphone, Kindle or tablet. The reader processes credit or debit card payments through the same secure network that processes Amazon.com purchases.
The service is designed to serve on-the-go small business owners who might otherwise only accept cash or checks, including massage therapists, food truck operators and artists who sell their work at outdoor fairs.
Amazon is selling the card reader for $10, but the first $10 in transaction fees will be credited back to the customer.
The move places the largest U.S. e-commerce retailer in competition with Square and other established mobile payment processing systems such as PayPal Here and Intuit's GoPayment.
Amazon shares are up more than 3 percent on the news.