Workmen dig 300,000 holes each year in London, according to TfL
Utility companies must apply for permits before digging up the road in 18 London boroughs under a scheme meant to reduce disruption for road users.
Transport for London (TfL) said it would allow them to co-ordinate works so two utilities work on the same spot at once, rather than dig it up twice.
The scheme, agreed on Monday, will start on 11 January. Mayor of London Boris Johnson called it "long overdue".
Utility companies dig up 300,000 holes in London each year, TfL have said.
Mr Johnson said: "This is long overdue. Drivers in London have too often been the victims of unnecessary roadworks, forced to sit stationary in traffic-clogged frustration caused by work sites reminiscent of the Mary Celeste.
"If companies want to dig up the roads, they must do so in a co-ordinated manner that causes minimum disruption to Londoners - and this scheme is a step towards a solution."
In addition, TfL is in discussion with the Department of Transport to allow it in the future to charge companies rent by the day to dig up roads.
TfL hopes this will make them even more keen to complete works fast.
It is understood utility companies have previously voiced concerns the scheme would cost them money.
But a Thames Water spokesman said: "We fully support the scheme's aims of minimising traffic congestion and improving co-ordination of streetworks."