It applies to all locations where a maximum speed is not posted.
The new law cuts the speed limit from 30 mph (48 kph).
The measure is part of Mayor Bill de Blasio's ambitious traffic safety plan known as "Vision Zero" to reduce pedestrian and driver deaths.
The city is replacing about 3,000 speed signs.
The 25 mph (40 kph) speed limit affects about 90 percent of the city's streets.