The intelligent Internet of Vehicles (IoV) provides superior results in effectively addressing complex transportation challenges. Predicting vehicle traffic, crashes, demand, location, communication, and travel safety are all critical issues in today’s transportation systems. The proposed paper optimizes vehicle traffic by incorporating reroute recommendations, increasing the use of public transportation, and providing onboard vehicle drivers with intelligent health assistance using Federated Learning (FL). This research also focuses on resolving complex transportation issues such as a vehicle’s current location, exact vehicle count information on each route, and onboard vehicle vacant seat information. Furthermore, vehicle communication contributes to the proposed system’s efficiency by avoiding communication delays or information loss to registered users and the cloud server. An intelligent FL-based scheme for vehicle route optimization has been proposed as part of this research to prevent vehicle traffic in a real-time Internet of Things (IoT) connected IoV transportation system. The vehicle detection approach determines the number of vehicles traveling on each route to recommend the best route to registered users. The effective implementation of cluster-based vehicle communication and location estimation models enhances the efficiency of the proposed system.