New plans from London mayor Boris Johnson will make it compulsory for all new London taxis and buses to be hybrids and "zero emission capable" by 2018.
Matthew Pencharz, the mayor's environment advisor, told The Times that the advanced technology would allow vehicles to recognise when they are in highly-polluted areas, prompting them to switch to the greener mode.
He said: "With geo-fencing technology, when the vehicle crosses a particular line, it will go into electric mode. Some of our buses in future will also be doing this.
"The technology can be responsive, so if one bit of town is more polluted than another, then the buses and taxis would switch to electric mode where the pollution was worse."
By 2016, there will be 1,700 hybrid buses in London but Pencharz added that this technology could be fitted to private cars in "due course".
Which areas this technology will be used in hasn't been finalised yet, but a study undertaken by the Department for Environment, Food and Rural Affairs showed that traffic travelling along the A302 caused the highest levels of toxic gases at an average of 152 micrograms per cubic metre of air in 2012.
This news follows an announcement by the Mayor of London that drivers of diesel cars could face an extra daily charge £11.50 to enter central London.