The limits will apply to what are known as B-permits or five-year residence permits for immigrants from the Eastern European countries known as the EU-8 and for the EU-17 countries, which include western Europe, Greece and Cyprus. Switzerland is not a member of the union but has agreed to its freedom of movement treaty.
The council said are allowed under a safeguard clause in the agreement.
Catherine Ashton, the EU foreign policy head, said the new restrictions violate freedom of movement, the BBC reported.
"These measures disregard the great benefits that the free movement of persons brings to the citizens of both Switzerland and the EU," she said in a statement.
With low unemployment and high salaries, Switzerland has become a magnet for high-skilled EU workers.
"Switzerland is an attractive destination for migrants, and over recent years the number of people coming to live and work in the country rose annually by around sixty to eighty thousand compared with the number of persons leaving the country," the federal council said in a statement. "This constant growth has both positive and negative effects, for example on the economy and the labour market, on the social insurance system, spatial planning, the housing market and infrastructure."
The restrictions will be in place for a year, beginning May 1.
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