The ban, which was approved unanimously by the city's board of health, limits the amount of trans fats in prepared food to a half gram per serving.
Trans fats an artificial preservative used in deep fryers to prepare French fries, fried chicken, and other fried goods, has been linked to heart disease.
The board of health is giving the city's 24,000 restaurants 18 months to phase out the use of trans fats, which it calls an unnecessary and dangerous ingredient.
"New Yorkers are consuming a hazardous, artificial substance without their knowledge or consent," Health Commissioner Thomas Frieden, said in a statement.
"Like lead paint, artificial trans fat in food is invisible and dangerous, and it can be replaced."
The health department wants restaurants to switch to heart-healthy oils, such as corn, canola, and soy.
Chuck Hunt, the executive vice president of the local chapter of the New York State Restaurant Association, has called that a "recipe for disaster."
"The Department of Health clearly has not considered the impact to the small businesses of New York City, the small restaurants that are the backbone of many communities with our city," Hunt told city health officials at a public hearing on October 30.
He said smaller restaurants, like local diners, delis, and family-owned outlets, have fewer resources than their larger competitors, and as such face "dramatic changes to their menus, their pricing and their business models" as a result of the ban.
According to the National Restaurant Association, New York's restaurants are the city's largest private employer, representing more than 225,000 jobs and $11.3 billion in annual sales.
Other restaurant industry officials also questioned the availability of alternative oils.
"It will be a matter of years before the crop supply is adequate to produce enough trans fat free oils for some restaurant chains," Sheila Weiss, the National Restaurant Association's director of nutrition policy, told health board officials.
Tom Zagat, co-founder of the popular Zagat restaurant guide, said restaurants should have "no trouble" complying with the regulations, calling the ban "both good and long overdue."