Former Clyde resident Mike McIvor, who recently returned to the area after 22 years in Australia, said the last service ended about 12 months ago after the operator suffered ill health.
Mr McIvor said he and his wife Jenny, who was born in Alexandra, will be the drivers for the new service, which began on Friday night.
He said his mother, who lives in Alexandra, told him of the need for a taxi in the town.
Although based in Alexandra, the service will take in Clyde, Cromwell and Omakau, Mr McIvor said.
In future, it could also provide transport to Queenstown, Wanaka and Dunedin.
However, he said for that to happen he would need another taxi, so there was always one in the Alexandra area.
"You have to look after the local people first.
"It's all about providing a service."
He said part of the personal touch he and his wife would offer included helping elderly people with their groceries.
During weekends, the taxi would be available almost 24 hours a day.
Mr McIvor said his fares were the same as those charged by previous Alexandra taxis.
As a taxi licence holder, he can be hailed from the side of the road.
Central Otago Grey Power president Allan Jackson said while he would prefer to see a bus running from Alexandra and Cromwell to Dunstan Hospital in Clyde, a taxi would fill a gap in available transport services.
He said some elderly people also needed assistance to do their shopping, so a new taxi service would be useful.
