Nguyen Anh Quan, vice chairman of Hoan Kiem District, where the street is situated, said barriers would be put up at the grade crossing to keep out tourists.
All business licenses issued to households along the street will be revoked "in three days max," Quan said Wednesday.
The move comes a day after railroad authorities urged the city to shut down selfie hotspots and makeshift coffee shops along Train Street, citing "safety concerns."
Hanoi Train Street has railway tracks running along Dien Bien Phu and Phung Hung streets in the heart of the Old Quarter with residential buildings barely feet away on either side.
The highly unusual sight fascinates both domestic and foreign tourists.
Since Vietnam reopened in March, the street has again started drawing tourists.
Cafes have set up tables and chairs along the tracks and tourists stand in the middle to take selfies.