Last year the BBC found an arrangement between the UK and Hong Kong was being exploited by agents illegally obtaining UK licences for foreign drivers.
Motorists wanting to exchange non-EU licences must now prove they have passed a test in a designated country.
Roads minister Stephen Hammond said the move would make Britain’s roads safer.
Nationals from India, Pakistan, Nigeria, Malaysia, the USA, Israel and China are among those the UK government does not permit to swap their foreign licences into a full UK licence without a test.
Motorists from all countries are allowed to drive in the UK for a year before being required to take a driving test if they do not qualify for an automatic swap of their foreign licence.
An investigation for BBC London’s Inside Out programme last year revealed agents in the capital were arranging to swap foreign licences into UK ones via a Hong Kong licence, which the UK does accept automatically, to bypass the rules.
A BBC researcher’s Indian licence was swapped by an agent into a full UK licence.