A major crossing point is the Oresund strait bridge between Malmo in Sweden and the Danish capital Copenhagen, made famous by TV series The Bridge.
The checks have irritated commuters who travel daily between the two cities.
More than 163,000 asylum seekers arrived in Sweden in 2015 but that number fell to 29,000 last year.
The falling number of arrivals means the checks on buses, trains and ferries are no longer necessary, the government says.
Border security will continue to be to tightened
But while ID checks at border points with Denmark are being scrapped, border controls elsewhere will continue to be tightened, it says.
Interior Minister Anders Ygeman also said more surveillance cameras would be used on the Oresund bridge, in addition to vehicle x-rays.
Meanwhile, the European Commission recommended that temporary border controls introduced in Germany, Austria, Denmark, Sweden and Norway during the migrant crisis be phased out in the next six months.
“The time has come to take the last concrete steps to gradually return to a normal functioning of the Schengen Area,” EU Migration Commissioner Dimitris Avramopoulos told journalists, referring to the passport-free zone.
In November 2015, Sweden began allowing police to check people entering Sweden from other states in Schengen.
“The government’s conclusion is that border controls are still needed and need to be strengthened,” Mr Ygeman was quoted as saying by The Local news website, hours before the EU Commission’s announcement.
The measure mandating identity checks on passengers travelling between Denmark and Sweden by bus, train and ferry was last extended in February and expires on 4 May, with the government to let it lapse, Swedish media report.
An estimated 20,000 commuters daily cross the Oresund bridge.