Varicella vaccination is optional and requires self-payment. On 1 December 2018, Wuxi City launched a free varicella vaccination program for children. This study aimed to evaluate the changes in varicella incidence before and after the implementation of the policy. The data were obtained from official information systems and statistical yearbooks. We divided the period into chargeable (January 2017 to November 2018) and free (December 2018 to December 2021) periods. Interrupt time series analysis was used to conduct a generalised least-squares regression analysis for the two periods. A total of 51,071 varicella cases were reported between January 2017 and December 2021. After the implementation of the policy, there was a statistically significant decrease in the incidence of varicella (β2 = −0.140, P = 0.017), and the slope of the incidence also decreased by 0.012 (P = 0.015). Following policy implementation, the incidence decreased in all age groups, with the largest decline observed among children aged 8–14 years (β2 = −1.109, P = 0.009), followed by children aged ≤7 years (β2 = −0.894, P = 0.013). Our study found a significant reduction in the incidence of varicella in the total population after the introduction of free varicella vaccination in Wuxi City.