Coppergate in York can only be used by buses, taxis and permit holders between 08:00 and 18:00.
Drivers breaking the rules will receive a penalty notice of up to Â£60.
In 2015, City of York Council was forced to pay back fines after a tribunal ruled errors in the signs on Coppergate meant the restrictions were not enforceable.
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Penalty notices totalling more than Â£385,000 which were given to 12,000 drivers in Coppergate were refunded after the council abandoned the scheme in 2014, less than a year after it was introduced.
Automatic Number Plate Recognition (ANPR) cameras will be used to enforce the new restrictions while the previously criticised signage has been improved.
Drivers who enter the restricted area will be sent warning letters for the first two weeks of its operation.
After that, a letter will be sent for a first offence, with a fine for a second one.
From July, all offences will attract an immediate fine.
Conservative councillor Ian Gillies said the scheme was designed to enforce traffic restrictions in place on Coppergate since the 1960s which were "only enforced infrequently".
He said: "The reintroduction of the restriction along with a substantial amount of clearer and more robust signage will hopefully help reduce the number of people wrongly entering the street and help traffic to flow better in the area.
"This will hopefully in turn help the city's bus services to run more efficiently."

Phase one of the project will take 10 weeks to complete and will see demolition of the rear function room of the Ship and Anchor pub.
An old library building will also be knocked down and a new car park built.
Pembrokeshire council also wants to create a one-way system, footways and a public transport hub, with work starting later this year.
The master plan includes a new link road, retail units and the demolition of buildings, including the derelict Fishguard Junior School, on 1.5 hectares (3.7 acres) of land.
Councillors hope it could encourage further investment in the town.

The bung was left in place after the procedure at Northampton General Hospital.
A report which went before the hospital's public trust board said the patient was discharged home and the bung fell out four days later.
The hospital has apologised for the incident and said it had learned from the error.
It was one of two "never events" to happen at the hospital in Cliftonville in 2016.
A hospital spokesman said details could not be given of the second incident - that happened in January - due to confidentiality reasons but it was described as "wrong site surgery" in July's report.
The spokesman said: "Almost 80,000 procedures are performed annually by our medical and nursing staff.
"We are committed to providing each and every one of our patients with a high level of safe care and are deeply sorry that, in these two cases, a vital aspect of the care provided fell short of the standard we would expect.
"We don't underestimate the effect of a never event on our patients and our staff.  That is why we believe we need to openly tackle these issues on the rare occasions they occur.
"We have undertaken thorough investigations into the circumstances surrounding each of these never events and reported them to the Care Quality Commission, NHS England and our commissioners.
"As a result of our investigations we have improved our theatre reporting and recording systems."
Traffic restrictions previously deemed "unenforceable" have been reintroduced on a city centre street.
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Work has begun on plans to alleviate traffic congestion and regenerate Fishguard town centre in Pembrokeshire.
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Surgical staff left medical equipment in a patient undergoing a hysterectomy at a hospital in Northamptonshire.