The driver, from Glenrothes, broke the ban after he was caught lighting up in his empty cab.
He was immediately issued with a £50 fine.
Now Fife Council, which announced the punishment but refused to name the culprit, is reminding other taxi, van and lorry drivers of the consequences of flouting the smoking ban.
It has also taken on four more enforcement officers to ensure the controversial law is upheld.
Kenny Riddoch, environmental team leader, said: "All Fife taxi operators were advised of the new legislation by letter prior to the ban. There is really no excuse for smoking in these vehicles.
"We have now issued 42 written warnings with a significant proportion of those being for smoking in work vehicles.
''Such is the level of non-compliance being noted in works vehicles, that more fixed penalties seem extremely likely."
Under the new law, all public transport must be smoke-free, even when the driver is in the cab on his own.
Company cars are exempt, but individuals caught smoking in all other vehicles used for business and public transportation are affected.
Four new enforcement officers have been patrolling businesses throughout Fife, and their focus is on work vehicles after an initial concentration on pubs and clubs.
Councillor Andrew Keddie said: "Like it or not this legislation is in force and taxi and van drivers, along with everyone else in the business community, must realise that if they don't comply they risk a heavy fine.
"Its encouraging that pubs and clubs have been complying. We need taxi, van and bus drivers to follow their example."
Brian McGurn, owner of Street Cars taxi firm in Kirkcaldy, said: "As far as I know my drivers smoke outside the car, but I have heard of drivers at other companies who think they are off-duty when they are travelling to a fare out of town.
"If a driver was on a taxi fare to Cupar for example, he might think it acceptable to light up in the car on his way there because he is technically off-duty and he can't pick up. However, most smoke outwith the car. This might change in winter, but they won't get away with it in this firm."