The move is to be presented on Friday as part of the party's shadow budget.
The Social Democrats' potential coalition partners, the Left and Green parties, have each rejected the proposal.
The Social Democrats' intention is for Sweden's municipalities to share the responsibility for receiving refugees more equally.
The restrictions are only intended to last for the period in which a newly arrived refugee receives introductory benefits. And the party's integration spokesman Luciano Astudillo promised a degree of flexibility in the system.
"It may be that several councils club together; accommodation may be in a certain municipality whereas a person's job is in another," Astudillo told Sveriges Radio.
But the Left Party's integration spokesman Kalle Larsson slammed the proposal.
"No, we absolutely cannot go along with this. In practice it means that people are under council arrest if they are to retain their introductory benefits," he told Sveriges Radio.