According to The Local, the number of tourist beds will be capped at a combined 623,624 on both islands and those who attempt to rent out unlicensed properties could be fined up to €400,000.
The news comes after a number of street protests by locals in Mallorca, Barcelona and the Basque Country.
The laws will regulate the business of short-term holiday flat rentals through websites like Airbnb and HomeAway. Flat owners will be required to be licensed and registered, and fines can be issued to the owner and the rental company if they don't comply.
It's also believed that there will be a hotline on which neighbours can report suspected unlicensed properties.
Authorities have issued a ban on rentals in all residential buildings, not including rural or free-standing properties. Licenses are only issued to buildings that have the consent of the neighbours' associations and that meet safety standards and have separate water meters.
If Airbnb, or similar home-sharing sites, advertise unlicensed rentals, they could receive the hefty fine of up to €400,000. The company has described the rule as "confusing", adding it was penalising locals who want to participate in 'the shared economy' by occasionally renting out a spare room in their home.
According to CN Traveller, the company added: "By working together, we can help build sustainable tourism models that spread benefits to many—not keep them in the hands of a few."
The Balearic islands tourist minister, Biel Barceló, said he hoped the laws would 'bring order' to a sector that had grown out of control.
Crackdown on Airbnb rentals have also occurred in Barcelona, while a blanket ban on short-term rentals has been issued in New Orlean's French Quarter.
Ibiza: Ten must-see places
Ibiza: Ten must-see places
Dalt Vila, which translates as 'High Town', is one of the oldest areas in Ibiza and the history can be seen in the ancient battlements and the local archaeological museum. Take time to explore the winding, cobbled streets of the old town and catch a glimpse of some of the most beautiful views on Ibiza.
Es Cubells may be one of Ibiza's smallest villages but the area is well known for its beautiful white washed church which stands out against the beautiful, blue skies. The village can be found in the south west of the the island and is close to the sandy cove at Cala d'Hort which is another must-visit site. Alternatively head along the west coast of and visit Ocean Beach Ibiza for a luxurious night under the Mediterranean sun. The beach club can be found in San Antonio, one of the most famous parts of the island.
Es Vedra lies off the south coast of Ibiza and this small and rocky island is uninhabited. Legend has it that Es Vedra is one of the most magnetic places on earth, although many believe this isn't true as the island is made up predominantly of limestone. Another well known myth claims Es Vedra is the uppermost point of the sunken city of Atlantis. The view of Es Vedra from the mainland is one not to be missed during any holiday in Ibiza.
The Punta Arabi Hippy Market has been a long term fixture in the area, having been started in 1973. The famous market attracts thousands of visitors each year, all of whom are keen to experience the melting pot of culture and creativity. The market is open from April to October each year and can be found in the grounds of Club Punta Arabi.
Formentera is an island off the coast of the notorious party destination Ibiza, but a holiday here is the antithesis of a wild night out. You'll need to hop on a ferry to get to Formentera but it's well worth the wait because once you're there you'll find a peaceful island with plenty of natural beauty to be enjoyed.
Es Pujols may be a tourist resort, but you wouldn't know it when you take a look around. Tourists and locals blend together and the white sandy beach backs onto street full of bars and restaurants. The peaceful atmosphere is brought to life at night when everyone enjoys the last of the evening sun on the terraces.
Atlantis can be found opposite the rocky island of Es Vedra on Ibiza's beautiful coastline. Hundreds of years ago the area was used as a quarry and the rock formations are still visible now, especially in bright sunlight. The hike down to Atlantis can be tough but it's worth it for the view at the end.
Just a 15 minute drive from San Antonio, Cala Salada beach can be found in a stunning inlet with amazingly clear waters and lush greenery all around. The calm beach is a haven for tourists and locals alike as the waters are never filled with tourist ferries, making it the perfect place for a swim.
There are plenty of places around the island where you'll have the opportunity to enjoy some of Ibiza's absolutely stunning sunsets. Those looking for an unobstructed view of the setting sun should head to one of Ibiza's many beaches where not only will you have the chance to watch the natural beauty as it happens but you'll be surrounded by the pure white sands and clear blue waters Ibiza is known for, the best way to end the day.
The island may be known as one of the party capitals of the world but the island is also renowned for its stunning scenery and coastline. Make the most of your flight onto the island and try to bag a seat by the window to take in the beauty of Ibiza as you come in to land.