The hope is that seeing themselves on screen will make hooligans think twice before causing damage.
Lothian Buses has already spent hundreds of thousands of pounds installing closed circuit television on its vehicles and in its depots.
It is now spending a further 250,000 installing four of the television-size screens on each of 200 double-decker buses.
Warning signs currently tell passengers they are being watched.
But it is hoped the constant reminder provided by the television screens - which will show live pictures of what is happening around the bus - will be a more effective deterrent.
The move is believed to be the first of its kind by a bus company in Scotland.
Vandalism costs Lothian Buses and rivals First Edinburgh almost 1 million a year between them. That figure does not take account of injuries, cancelled services and the use of police resources.
A Lothian Buses spokesman said it hoped the screens would also cut down the number of attacks on passengers and staff. He said: "We are hoping the monitor’s visual presentation will act as a deterrent to vandals and enhance the safety of passengers and our staff.
"We already have conventional CCTV in our buses, but this is a step further and a major financial commitment.
"It is about six seconds before the image is refreshed on the monitor and replaced by another image from another camera.
"But all the images are recorded and they are kept for 14 days and extricated if necessary."
The 15-inch monitors are being installed on 155 double deckers immediately, with a further 45 buses set to follow later this year. There will be one screen at the top of the stairs, two at the back of the top deck, and another on the bottom deck.
The pictures shown on the screens vary between the images being recorded by the eight CCTV cameras on each of the buses.
The images are recorded by four cameras upstairs and four downstairs, and stored in a computer hard drive on the buses.
The company will have spent a total of 500,000 by the end of the year on CCTV for its buses, depots and travel shops.
In the future, the company hopes to set up a command centre where all images are automatically transmitted to headquarters where they are monitored continuously.
Councillor Andrew Burns, the city’s transport leader, today welcomed the move. He said: "As a regular bus user, I see the amount of problems caused by vandalism and damage to buses.
"I have seen these monitors in operation and I am sure they will act as a deterrent to vandals and save Lothian Buses a lot of money in cutting the amount of vandalism and problems."
Last year, police launched a crackdown to tackle growing violence and vandalism on the city’s buses.
Scotland’s first dedicated bus crime specialist was appointed to oversee the initiative, which aims to cut down on attacks on drivers and passengers, as well as the problem of vandalism and theft.
The officer is able to call on undercover police to patrol buses and target known offenders and vandals.
It comes in the wake of a growing problems of bus drivers and passengers being assaulted, and missiles being thrown at vehicles.
Last year, Lothian Buses offered to pay for police to patrol buses after a sharp rise in attacks on drivers and passengers.
And Chief Constable Paddy Tomkins gave the company a clear indication that his force would be willing to accept money in return for mounting extra patrols.