Low-slung trousers are fashionable among some young people
Delcambre town council unanimously passed the ordinance earlier this week making it a crime to wear trousers that show underwear.
"If you expose your private parts, you'll get a fine" of US$500 (£254) Mayor Carol Broussard said.
Offenders will also risk up to six months in jail.
Speaking of people who wear saggy trousers, Mr Broussard told the Associated Press news agency: "They're better off taking the pants off and just wearing a dress."
Town attorney Ted Ayo said the ordinance expands on the existing state indecent exposure law by adding underwear to the list of forbidden exposures.
"This is a new ordinance that deals specifically with sagging pants," Mr Ayo said. "It's about showing off your underwear in public."
Some residents say the ordinance targets blacks, as low-slung trousers are fashionable among hip hop fans.
Mr Broussard denied it was racially motivated."White people wear sagging pants, too," he said.