The invention discloses a method and system for real-time automatic optimal dispatching of a plurality of taxicabs to passenger pick-up locations. The system uses optimization model to optimally dispatch taxicab vehicles in order to minimize total clients waiting time and to maximize taxicab business profitability. The optimization is performed based on the data on currently available taxicabs and their location, and based on the data on new clients orders and clients' pick-up locations, wherein the data on available taxicabs and their locations is obtained by the cell phone/GPS means from taxicab in-car devices and the data on clients' pick-up locations is obtained from clients cell phones/GPS-based devices.