Check 'custom rules' under the scenario tab, and go to edit the rules. Under the 'terrain' tab therein, find desert and tundra and uncheck the 'allow cities' box. You can change the food/shields/trade values for the terrain here too, as well as how effective irrigation/mining/roads are at increasing these (setting the values for any of those to 0 will make that improvement unavailable for the terrain).
The editor was expanded in patches, though, so if an option isn't present, make sure you've patched the game to the newest version available.