This comes after Zuma met with university vice-chancellors and council chairs, as well as student leaders.
The commission will investigate the feasibility of free education in South Africa, looking at its financial sustainability as well as the institutional autonomy of universities. It will assess the various roles that the government, universities, the private sector and students should play.
The inquiry will be chaired by a former judge of the Supreme Court of Appeal, Justice Jonathan Arthur Heher, who will be assisted by advocate Gregory Ally and attorney Leah Thabisile Khumalo.
They will have eight months to complete their investigation and submit their findings to the president.
Higher Education and Training Minister Blade Nzimande announced on Monday that an additional R6.91-billion has been allocated to support university funding.
This includes the R2.33-billion funding shortfall to ensure there will be no fee increases at institutions of higher learning in 2016.
An amount of R2.54-billion is earmarked to fund National Student Financial Aid Scheme (NSFAS) students whose fees have not been paid or who have been underfunded over the past three years.
The remaining R2.03-billion will be used to help current NSFAS beneficiaries complete their studies.