Female customers can only be served by female hairdressers, and men by male barbers.
The opposition Islamic Party of Malaysia (PAS), which controls Terengganu state, is giving hairdressers until the end of the year to choose whether they want male or female clients.
If they still want to cater for both sexes they must have two locations to deal with men and women separately.
Female customers can only be served by female hairdressers, and men by male barbers.
"You must have separate premises to deal with female clients," Wan Muttalib Embong, the top state official for local government, housing and environment, said.
Those who fail to abide by the directive would have their licences revoked, he warned.
Karaoke
PAS, which also controls neighbouring Kelantan state, wrested northern Terengganu state from Prime Minister Mahathir Mohamad's ruling United Malays National Organization in last year's elections.
In both states, PAS has forced Muslim women to wear headscarves, ordered separate lines for men and women at supermarkets and curbed the sale of alcohol.
Last month PAS announced a ban on karaoke and traditional Malay dance in Terengganu.
A state official said such entertainment could "lead to an increase in vice".
Pop concert
PAS is also urging the government to stop two concerts by Western and Indian singers, saying they will promote unsuitable behaviour.
European techno-pop group Vengaboys, currently at number 16 in the British charts, and a group of Indian movie stars are set to perform in the country's capital Kuala Lumpur in the next few days.
PAS youth chief Mahfuz Omar said the government must stop programmes which could bring about "unwarranted behaviour".
The Union of Peninsular Islamic Students has also asked for a ban on the shows because men and women would be able to mingle freely and ecstasy pills and liquor might be consumed.