The Hungarian capital powered past Riga and Prague to claim the top spot in the annual City Costs Barometer and has emerged as best value in the survey of 25 cities.
At £134.76 for 12 typical city break items - including meals, drinks, two nights' weekend accommodation, sightseeing and city transport costs - prices in Budapest are less than a third of those in Europe's most expensive cities - Stockholm (£420.36) and Copenhagen (£440.45).
The survey found that, along with Prague, Budapest is the only city where the holiday pound is worth more than a year ago because sterling has risen 3.1 per cent year-on-year against the Hungarian forint and 2.9 per cent against the Czech koruna.
The cities tipped as ones to watch in the Post Office Holiday Money Report are Lithuania's capital Vilnius (£140.99), Warsaw in Poland (£151.69) and capital of Latvia, Riga (£155.34).
However, the report revealed that prices have risen in 22 of the 25 cities surveyed, with Vienna, Boston and Stockholm seeing the biggest increases.
Berlin, Prague and Lisbon have seen prices drop, and lower sightseeing prices in the Portuguese capital, where spending money will stretch 19.1 per cent further, make Lisbon the cheapest eurozone city.
Andrew Brown of Post Office Travel Money said: "Rising prices in most of the cities we surveyed, combined with the falling value of sterling, make it more important than ever to check prices for key items like meals, drinks and sightseeing before booking as these are costs that most city break tourists cannot avoid.
"There are big price variations across Europe – not just in the eurozone. This means UK holidaymakers can make their pounds stretch further by choosing a cheaper capital like Lisbon or Budapest and it seems that many people are doing just that as Post Office sales of Hungarian forint have surged by 141 per cent in the year to date, compared with 2012."
Croatia was named another 'emerging' destination and despite a 12.9 per cent rise of city breaks to Dubrovnik (£168.20), the city remains one of the best value options. Other up-and-coming cities included Moscow, Krakow and Abu Dhabi.
The most expensive city in the survey was New York (£541.23).
With canals, cobbles and culture, Utrecht is an ideal European city for a short getaway. Visit the gothic Dom Church, take in the historic surroundings on a cruise through the canals and check out the Saturday flower market along the Oudegracht canal. The Centraal Museum (centraalmuseum.nl) is a must-see for its permanent art collection of children's character Miffy (one for the kids and adults!) How to get there:Fly to Amsterdam Airport Schiphol and get a direct train to Utrecht, which takes around 30 minutes.
As the capital of Switzerland, Bern is the home of the Houses of Parliament but has managed to retain the charm and uniqueness of a historic city. The old town is a UNESCO World Heritage Site and some of the must-see attractions include the Zytglogge clock tower overlooking the old town, the bear park (baerenpark-bern.ch) and the Garden of Roses. How to get there: Fly to Zurich and catch a direct train to Bern, which takes around an hour and 15 minutes.
As the oldest Portuguese city, Braga has plenty of historical sites for you to see. Highlights include the Bom Jesus do Monte Sanctuary, which has a unique baroque staircase, the 19th-century, domed Sameiro Sanctuary and the beautiful baroque Raio Palace. Foodies should try the local specialities, like potato and cabbage broth, maize bread and the local hams. How to get there: Fly to Porto and Braga is around a 40-minute drive away.
Head to the Andulician city of Cordoba that was once the centre of Muslim Spain and where you can still find some remaining Islamic architecture, like the Great Mosque of Cordoba (pictured) and the fortified Calahorra Tower. The city is famed for arts and crafts, so if you're thinking of picking up a locally-produced souvenir, there's leather, silver and ceramics on offer. How to get there: Reom Seville, catch a direct train to Corboba, which takes around 45 minutes.
While most people head to Dublin, Cork has as tonnes to offer and is fast becoming one of Europe's hippest cities. Marvel at the gothic spires of St. Finbarre's Cathedral, visit the picturesque Blarney Castle and check out the bustling English Market. If you're staying for more than a weekend, explore the nearby fishing village of Blackrock for a refreshing day out of the city and to stroll along its tree-lined avenue on the edge of the River Lee. How to get there: Fly direct to Cork Airport.
The spa city of Karlovy Vary, with its wonderful hot springs, is a great alternative to Prague. As well as having a relaxing treatment in one of the city's spas, you won't want to miss a visit to the Moser Museum to see the glassmakers at work, the views of the city from the Diana Lookout Tower, and a taste of the herbal Becherovka liquor, which is only produced in Karlovy Vary. How to get there: Fly to Prague and get a bus to Karlovy Vary, which takes around two hours and 15 minutes.
or a mix of the old and new, the divided Cypriot capital Nicosia, allows you to get a taste of its Greek and Turkish influences for a varied break. Get world-class views of the city from the Ledra Museum Observatory, feast on mezze in the local tavernas, visit the 16th-century Great Inn with its courtyard cafés, galleries and souvenir shops, and relax with a Turkish bath at the Omeriye Hamam, where you'll be scrubbed down after sweating out in a sauna - all things you can fit in a weekend break! How to get there: Fly to Larnaca Airport where Nicosia is a 30-minute drive away.
Experience two thousand years of history in southern Germany's Bavarian city, Regensburg. The 850-year-old Stone Bridge is a medieval masterpiece at 330 metres long and is the oldest preserved stone bridge in the country. For a trip to remember, take a guided tour through the Prince Thurn and Taxis Palace Museum displaying history dating back to the 12th century, eat at the oldest sausage kitchen in the world, the Sausage Kitchen and stroll through the twisting lanes and hidden courtyards of the old town, where you'll find some charming independent shops. How to get there: Fly to Munich and catch a direct train from the airport to Regensburg, which takes about an hour and a half.
Fancy a boozy weekend with style? Reims in the north-east of France is the champagne capital and home to the Veuve Clicquot (veuve-clicquot.com) house, where you can learn the secrets of its champagne production and take a guided tour of the cellars. Other highlights include the Notre-Dame de Reims Cathedral - known as the Westminster Abbey of France, the lively Place Drouet d'Erlon with its many bars and restaurants, and the charming sweet shops, like Chocolaterie des Sacres ( HYPERLINK "http://www.chocolaterie-des-sacres.com/" http://www.chocolaterie-des-sacres.com/) and Maison Fossier (fossier.fr), which is famous for its pink biscuits that you dip in champagne! How to get there: Travel by train with Eurostar from London to Paris, then Paris to Reims via TGV Est.
The baroque city of Turin is a must for architect lovers and is the car capital of Italy, being the home of Fiat automobiles. Around the city you'll find the towering Mole Antoniella building - a symbol of Turin, the spectacular Superga Basilica (pictured), which overlooks the city in the hills and a variety of historic cafés. Try Al Bicerin ( bicerin.it) for its delicious bicerin - a mixture of espresso, chocolate and fresh cream. How to get there: Fly direct from the UK to Turin Airport