Horse-drawn carriages (karozzini) will be banned during hot July and August afternoons under new legislation that will come into effect on Friday.
In a victory for animal rights campaigners, horses will now be kept off the streets from 1pm to 4pm, when temperatures are highest.
Horses will only be able to operate on alternative days and one horse will not be allowed to be used for more than three days a week.
Owners could be fined up to €65,000 if they breach the legislation.
Parliamentary Secretary for Animal Rights Clint Camilleri announced the new rules at a news conference.
"The horse is now considered an animal in its own right rather than just part of the vehicle," he said.
Carriages will only be allowed to carry a maximum of four people, plus the driver and each journey cannot be longer than 45 minutes.
Horses will also need to be put in the shade with water and necessary provisions.
Anyone caught breaching the new regulations can be fined anywhere from €2,000 to €65,000, Mr Camilleri explained. New, harsher penalties were approved last Wednesday, he said.
Those breaching the regulations will be considered to be mistreating horses, he said.
The ban comes after numerous protests by animal lovers for a gradual ban on horse-drawn carriages.
Karozzini drivers had previously warned that an outright ban or limiting hours would result in a "massacre" of horses.
Banning rides during the hottest hours of the day – also the most lucrative period for drivers – would have a crippling effect on operators and would also result in horses being abandoned, they had warned.
The parliamentary secretary insisted on Friday that discussions had been conducted with various stakeholders, including drivers, when the legal notice was being drawn up.
"There were proposals that promoted two extremes, but I think these changes strike a balance," he said.