City authorities will allow only 240,000 vehicles to be registered for 2011 - one-third of this year's total.
Car buyers have been swamping dealers in anticipation of the new rules, which will still leave about five million cars on the road in the capital.
Traffic and air pollution in Beijing is among the worst in the world.
Beijing officials are trying to balance the desire of a growing middle class to have the convenience and status of car ownership, with a huge congestion problem.
Officials said the new rules would not solve the full extent of the city's problems, only slow the down the rate at which they are worsening.
"It will be difficult to dramatically improve the traffic situation in a short time," said Liu Xiaoming, deputy director of the Beijing Traffic Management Bureau.
"But it can slow down the pace of worsening traffic congestion."
Car registrations will be allocated by a license plate lottery system from Friday.
Under the new rules, government departments will not be allowed to increase the size of their fleets for five years.
About 750,000 new cars appeared on Beijing's streets this year, raising the total of registered vehicles for the city 4.8m.
China overtook the US as the world's biggest car and van market in 2009, with 13.6 million vehicles sold within the country.
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