Owned by the Bank of Jiangsu in Suzhou City, the ATM allows people to withdraw five, 10, 20 and 50 yuan notes.
Normally only 100 yuan denomination notes can be withdrawn from ATMs.
"Small notes are used frequently in our daily life, but we usually can only get them at the bank counter. People can now get small change at the ATM to avoid queuing up," officials with the Suzhou branch of the People's Bank of China (PBOC), told state-run Xinhua news agency.
"We found that the 50 yuan and 20 yuan notes are more popular," said a bank clerk at the Suzhou branch of Bank of Jiangsu.
It is expected that about 20 such ATMs will start service in the first half of 2016 in Suzhou to help relieve the pressure of long queues in front of bank counters, the report said.