From January 1st 2015, taxi companies will be forced to tell customers in advance if the fare is likely to exceed 500 kronor ($67).
Drivers must reveal what the highest possible price for a journey could be and make a record of the agreement between them and their passengers.
Sweden's unregulated taxi fares have led to countless tales of passengers legally being charged eye-watering sums for short journeys. Tourists unfamiliar with the Swedish system have often fallen prey
to outrageous taxi fares, with some taxis charging 2,000 kronor from Arlanda Airport to Stockholm, four times the average fare.
Stockholm's main taxi companies offer similar rates for metred journeys, while independent (but legal) drivers are free to charge whatever they like and illegal drivers also vie for the same passengers.
"This industry must be cleaned up," Pia Nilsson from Stockholm Council's Transport Committee told Swedish newspaper Svenska Dagbladet. She said that tourists were regularly being charged "ten times as much as what is a reasonable price".
"The taxi industry has become some sort of Wild West, and this is a first step towards orderliness," she added.
The new regulations come as the app-based driver firm Uber also gains momentum in Sweden. It launched in Stockholm last year, offering prices agreed in advance by passengers who pay for their journeys using the phone app. The company has faced tough criticism from metre-based taxi firms who say Uber is confusing customers and taking away business.
"We are familiar with the phenomenon, but there are no concrete proposals for action," said Nilsson, who said that Uber would be investigated as part of a wider investigation of the taxi industry's future.