Using computer-generated augmented reality, the patient can see and move a virtual arm controlled by their stump.
Electric signals from the muscles in the amputated limb "talk" to the computer, allowing real-time movement.
Amputee Ture Johanson says his pain has reduced dramatically thanks to the new computer program, which he now uses regularly in his home.
He now has periods when he is free of pain and he is no longer woken at night by intense periods of pain.
Mr Johanson, who is 73 and lives in Sweden, lost half of his right arm in a car accident 48 years ago.
After a below-elbow amputation he faced daily pain and discomfort emanating from his now missing arm and hand.
Over the decades he has tried numerous therapies, including hypnosis, to no avail.
Within weeks of starting on the augmented reality treatment in Max Ortiz Catalan's clinic at Chalmers University of Technology, his pain has now eased.
"The pain is much less now. I still have it often but it is shorter, for only a few seconds where before it was for minutes.
"And I now feel it only in my little finger and the top of my ring finger. Before it was from my wrist to my little finger."
Mr Johanson says he has noticed other benefits too. He now perceives his phantom hand to be in a resting, relaxed position rather than a clenched fist.
"Can you imagine? For 48 years my hand was in a fist but after some weeks with this training I found that it was different. It was relaxed. It had opened."
Mr Johanson has also learned to control the movements of his phantom hand even when he is not wired up to the computer or watching the virtual limb.
Max Ortiz Catalan, the brains behind the new treatment, says giving the muscles a work-out while being able to watch the actions carried out may be key to the therapy.
"The motor areas in the brain needed for movement of the amputated arm are reactivated, and the patient obtains visual feedback that tricks the brain into believing there is an arm executing such motor commands. He experiences himself as a whole, with the  amputated arm back in place."
He says it could also be used as a rehabilitation aid for people who have had a stroke or those with spinal cord injuries.
Doctors have devised a new way to treat amputees with phantom limb pain.