Taxi-hailing apps Grab and Uber Technologies Inc must partner with a transport business and register their cars by the end of May if they want to go on operating in Indonesia.
Indonesia's new rules on the online ride-hailing apps come two days after thousands of cabbies held a protest rally in the capital, Jakarta, demanding the government ban the two companies.
The rise of ride-hailing apps has sparked protests and legal action around the world from traditional taxi operators, who see the new operators as a threat to their livelihoods.
"Uber, Grab are app companies. If they want (to operate), they have to partner with a transportation business entity, like a car rental company," Transportation Minister Ignasius Jonan told reporters.
Singapore's Grab and US-based Uber said they would abide by the new rules.
"Even before the demonstration, we had started the process to help our drivers form a cooperative unit and meet the requirements," Ridzki Kramadibrata, managing director of Grab Indonesia, told Reuters.
Donny Sutadi, Uber Indonesia's commissioner, told reporters they would partner with a car rental company.
The proliferation of cheap taxis using the ride-hailing apps in frequently gridlocked Jakarta has made the traditional pick-up and drop-off taxi services unprofitable, threatening the business models of the country's top taxi firms.
President Joko Widodo has welcomed the competition provided by the new companies.
Indonesian cabbies clashed with drivers working for online apps during the Tuesday protest.