Knowledge-based economy is an economic model students need to be prepared for a future economic model that uses knowledge as its main resource. Therefore, this study developed and validated instruments for constructing knowledge-based economy readiness among undergraduate students. This study used an online questionnaire with 120 respondents of economic education students in educational universities in East Java, Indonesia, for exploratory factor analysis and 417 respondents for confirmatory factor analysis. Then, statistical analysis was conducted using exploratory factor analysis in SPSS and confirmatory factor analysis in AMOS. This study first developed five factors of knowledge of economics, readiness for economic challenges, readiness for education, readiness for infrastructure, and readiness for innovation, consisting of 27 items. However, one item was removed because the loading factor was below 0.50. Consequently, 26 items were retained because the loading factor was significantly greater than 0.50. The Cronbach's alpha value for each item of the knowledge-based economy readiness construct was >0.60 and met all goodness of fit index criteria, which means that it meets the requirements and can measure the construct of knowledge-based economy readiness. Since this study meets the validity and reliability requirements of the constructs leading to knowledge-based economy readiness, these results will help students prepare for the current and future knowledge-based economy. They can be used in developing economic education curricula in higher education.