In future, all applications from drivers with convictions for sexual or violent offences will be refused, except in "exceptional circumstances".
Last month it was revealed that Nadeem Ahmed Kiani, who was convicted of rape in 1994, had been given a taxi licence.
The new guidelines were agreed at a council meeting on Monday night.
They will allow council officers to consult the police in future applications.
Two extra enforcement officers are to be employed to cope with the extra workload.
Licence applications will also take longer, allowing more time to consult law enforcement agencies and to interview drivers.
The Labour leader of Milton Keynes Council, Peter Marland,  has called the decision to grant a taxi licence to Kiani "inexplicable".
Mr Marland said: "These changes will make things clearer.  There will be a phased improvement plan of licensing regulations.
"Over the next two months, the council will conduct checks on all 1,300 drivers.  Those which raise concerns will be interviewed and we will involve the police if necessary."
Kiani, 44, was imprisoned for rape and serious sexual assault. His taxi licences have been revoked.
Milton Keynes mayor Subhan Shafiq, who had vouched for Kiani, has resigned from his post.
More than 1,300 taxi drivers in Milton Keynes will undergo fresh police checks, after it was discovered a convicted rapist was granted a licence.