To reduce congestion and air pollution, 20% driving restriction, a license plate-based traffic control measure, has been implemented in Beijing since October 2008. While the long-term impacts of this policy remain controversial, it is important to understand how and why the policy effects of driving restrictions change over time. In this paper, the short- and long-run effects of the 20% driving restrictions in Beijing and the key factors shaping the effects are analyzed using daily PM₁₀ pollution data. The results showed that in the short run, 20% driving restriction could effectively reduce ambient PM₁₀ levels. However, this positive effect rapidly faded away within a year due to long-term behavioral responses of residents. A modified 20% restriction, designed to replace the original 20% restriction system since April 2009, which is less stringent and provides more possibility for intertemporal driving substitution, has shown some positive influence on air quality over the long run comparing with that under the original policy design. Temporarily, the more stringent the driving restriction was, the better effects it would have on air quality. In the long-run, however, the policy was likely to cause a vicious circle, and more stringent policy might induce stronger negative incentives which would result in even worse policy effects. Lessons learned from study of the effects of driving restrictions in Beijing will help other major cities in China and abroad to use driving restrictions more prudently and effectively in the future. Decision-makers should carefully consider the pros and cons of a transport policy and conduct the ex-ante and ex-post evaluations on it.