Abstract An exact and, possibly, general solution to the quantum constraints is given for the sector of general relativity containing cosmological solutions with two space-like, commuting, Killing fields. The dynamics of these model space-times, which are known as Gowdy space-times, is formulated in terms of Ashtekar's new variables. The quantization is done by using the recently introduced self-dual and loop representations. On the classical phase space we find four explicit physical observables, or constants of motion, which generate a GL(2) symmetry group on the space of solutions. In the loop representations we find that a complete description of the physical state space, consisting of the simultaneous solutions to all of the constraints, is given in terms of the equivalence classes, under Diff(S1), of a pair of densities on the circle. These play the same role that the link classes play in the loop representation solution to the full 3+1 theory. An infinite dimensional algebra of physical observables is found on the physical state space, which is a GL(2) loop algebra. In addition, by freezing the local degrees of freedom of the model, we find a finite dimensional quantum system which describes a set of degenerate quantum cosmologies on T3 in which the length of one of the S1's has gone to zero, while the area of the remaining S1×S1 is quantized in units of the Planck area. The quantum kinematics of this sector of the model is identical to that of a one-plaquette SU(2) lattice gauge theory.