The software fault is restricted to five-cylinder diesels from the 60 and 70 series constructed from the middle of 2015.
Almost half of the affected cars are in Sweden, but Britain and Germany are also key markets.
Group spokesman Stefan Elfstrom said that the glitch can be “unpleasant” but there had been no recorded accidents as a result.
The glitch can shut down the engine and electrical system while the car is in motion, but Mr Elfstrom said they would then both restart immediately.
The problem had been reported by drivers of new Volvos who said that the fault causes a brief absence of steering and braking.
The company says it will write to owners who can have the problem fixed at no cost at local dealerships.
The news comes just two days after Volvo, owned by the Chinese Geely group, announced a massive increase in net profits.
Net profit jumped nearly nine-fold to 4.48 billion kronor ($527 million) in 2015.
Turnover was up 19 percent on the back of record unit sales of 503,127, up eight percent from 2014.
“We had to make bold decisions in the last few years – that was a necessity – by investing to have new vehicles, new motors, new platforms,” chief executive Håkan Samuelsson told the AFP news agency on the margins of the automaker's results presentation.