The Municipal Licensing and Standards Committee recommends that food trucks be at least 50 metres from a restaurant and at least 30 metres from school property.
Ice cream trucks are to operate temporarily on residential streets, and stationary food carts are to operate on some city sidewalks.
The annual fees for a vendor would cost over $5,000, including the vendor permit and parking fees.
The proposed bylaw will also allow business improvement areas to pressure the city to ban food trucks from certain areas.
Food truck owners fear this will give restaurants veto power over where they can set up.
Zane Caplansky, who owns Caplansky's smoked meat restaurant on College Street and also owns a food truck, wants food trucks to be able to operate without restrictions in Toronto.
He said the competition the food trucks will bring to restaurants would benefit the consumer because they will get more value and choice in what they want to eat.
"Competition is good for everybody, and if you are afraid of competition, get out of business," Caplansky said.
SEE: The food trucks currently operating in Toronto: