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.
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 real story of 'The Bridge'
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.

Spanish official David Fernandez Borbalan ruled out a late Shane Duffy winner and waved away penalty appeals.
West Brom's McClean described the referee as "Austria's 12th man" while O'Neill said the Spanish official was "very poor" in the Aviva Stadium game.
Fifa has begun disciplinary processes.
A Fifa spokesman told the BBC they are probing remarks made by both men and it is understood manager and player have until Friday to respond to the charges.
As well as ruling out Duffy's header, Borbalan also decided against giving the Republic a penalty when Jon Walters went down under a challenge from Stefan Lainer.
"It should count, the referee should have given the goal," the manager said of Duffy's header.
"I personally think it typified the referee's performance.
"The lineman thinks he has given a goal and he's almost up at the halfway line before he is called back."
The Football Association of Ireland declined to make any comment when contacted on Wednesday.
Fifa stated: "We can confirm that disciplinary proceedings have been opened.
"Be informed that two cases were opened: one against James McClean and another one against the coach Martin O'Neill."
A spokesman for the world governing body said there will be no further comment as the matter is ongoing.

The collision took place on Repington Road, near its junction with Bagot Grove, in the Sneyd Green area of the city at about 17:00 BST on 14 April.
The boy, who was from the area, died in Birmingham Children's Hospital on Tuesday.
Staffordshire Police confirmed it was investigating the incident and appealed for any witnesses to come forward.
More on this and other stories from Stoke and Staffordshire
Sweden is ending identity checks on border crossings with Denmark that were instituted early last year as thousands of migrants arrived seeking asylum.
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Republic of Ireland boss Martin O'Neill and winger James McClean face punishment from Fifa for criticising the referee after the 1-1 draw in their World Cup qualifier with Austria.
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A seven-year-old boy has died in hospital five days after he was hit by a car in Stoke-on-Trent.