AirBnB is to block hosts in London from renting out homes for more than 90 days a year without official consent.
Under the proposals, hosts renting out entire properties will be notified as they approach the limit and given details of where to seek an extension.
The announcement brings the home-sharing website into line with UK law.
The move, which comes into effect from Spring 2017, follows concerns that short-term lets were fuelling a London housing crisis.
Tom Copley, Labour's housing spokesman on the London assembly, called the move a "huge step in the right direction".
It is already against the law for landlords to let out their homes on short term lets for more than 90 days without planning permission.
According to Mr Copley, councils did not have the resources or data to enforce the law.
A similar scheme has been agreed in Amsterdam which has a 60-day limit for most short-term rentals.
In a statement the company, which has been valued at £24bn, said: "We want to be good partners to London... and ensure home-sharing grows responsibly and sustainably."
Airbnb, has faced a regulatory backlash in some cities where leaders have grown concerned about its impact on housing supply.
Last Month Mayor of London Sadiq Khan wrote to MPs warning that legislation might be required to help councils regain "lost" housing supply.