Both commuter and long-distance train services passing through the south of the city are affected by the delays.
The Swedish Transport Agency has advised that problems will continue until around 8pm on Monday night.
"A rail grinder (a type of maintenance vehicle) caused a cable fire that led to the signal error at Stockholm Södra," Stefan Björkqvist, from the agency's management team told Swedish newswire TT.
Three out of four tracks used by the station are still in use, but some commuter services that usually stop at Södra are terminating at Älvsjö or Stockholm's Central Station instead.
The Uppsala commuter train is unaffected by the problems.
High-speed services between Stockholm and Gothenburg, Malmö and Karlstad are facing delays.
In southern Sweden some trains have been cancelled on the Linköping-Västervik and Linköping-Kalmar lines due to the risk of falling trees during heavy winds currently battering the region.
The travel chaos in the capital comes just a week after a commuter train ripped down an overhead cable near Årstaberg station in the south of the city, causing problems for commuters.
More than a dozen trains were ground to a halt with some travellers reported to have been stuck on board between stations for almost 90 minutes.
Prime Minister Stefan Löfven, alongside Finance Minister Magdalena Andersson, Education Minister Gustav Fridolin and Minister for Climate and the Environment Åsa Romson recently announced plans to invest 620 million kronor ($72m) in 2015 and thereafter 1.24 billion a year until 2018 to put an end to delays and train cancellations which have plagued Swedish rail travellers in recent years.
The bid forms part of the centre-left coalition's spring budget proposal, which is set to be presented by April 15th.