All operators of black cabs and private hire cars in the city can now fit their vehicles with the cameras after the scheme was given the go-ahead by the local authority.
It follows consultation with the trade and Scotland's Information Commissioner.
The city council tried to introduce CCTV in taxis in 2009 but withdrew the idea after the Information Commissioner recommended not taking it forward. There had been concerns of potential legal action due to infringement of civil liberties.
The council's licensing committee gave the go-ahead after hearing CCTV was a valuable tool for crime prevention while also enhancing safety for drivers and passengers.
In line with the Data Protection Act, any taxi operator using CCTV will become controller for images caught on camera and have the responsibility to ensure an individual's privacy was properly protected.
Images can be retained for only 31 days, must be securely stored at all time and never be downloaded to portable devices such as memory sticks or CDs.
Police, licensing officers and insurance investigators can only view footage or images following a request in writing, while individuals can view footage or image if they are a subject of a recording.
Rules also prohibit CCTV systems from recording conversations between passengers and it is expected operators will use systems that have no sound recording facility. Those that do allow sound recording will be justified in using it where there is a specific threat to driver or passenger safety and recording is triggered by a "panic button'.
Failure to meet the terms of the Data Protection Act can result in the Information Commissioner's Office imposing a financial penalty of up to £500,000 or taking other enforcement action that may result in criminal prosecution.
The use of CCTV in cabs will not be a mandatory requirement.
Councillor Chris Kelly, chairman of the licensing committee, said: "The overwhelming majority of taxi journeys pass off without anything untoward ever taking place. Unfortunately, incidents do happen and it is right safeguards are in place wherever possible."
"CCTV has been a feature of modern society for many years, helping with the prevention and detection of crime on a day-to-day basis. It is already common for trains and buses to have security cameras and it is sensible to extend their use to taxis as well.
"We have consulted extensively with the Information Commissioner and our policy outlines very clearly what taxi operators need to do to ensure security camera footage is handled appropriately."
Stephen Flynn, vice-chairman of Glasgow Taxis Ltd, said: "We are delighted the council has approved the policy.
"The safety and well-being of our drivers and customers is paramount and we will support all taxi owners who wish to install appropriate CCTV equipment. Such equipment will provide all parties with a stronger sense of security and the policy will help us ensure minimal impact on customer privacy."
The move follows a Scottish Government survey that found one in three taxi drivers has been assaulted at work. It would bring Glasgow into line with Manchester, Liverpool, Gateshead and London, as well as East Renfrewshire Council - the first Scottish council to permit them - and Dundee.
A similar scheme is also under consideration in Edinburgh.