Victorian Premier Daniel Andrews has declared a state of disaster across Victoria from 6pm Sunday, in addition to the existing state of emergency.
Police are also being given additional powers.
Mr Andrews has announced stage four restrictions for Melbourne and Mitchell Shire and stage three restrictions for the rest of the state.
It comes as seven people died in the state in the past 24 hours and another 671 new cases of coronavirus were recorded.
Mr Andrews has announced regional Victoria will move to stage three restrictions, where there are only four reasons to leave the house.
"If we don't make these changes, we're not going to get through this," Mr Andrews told reporters.
"We need to do more. That is what these decisions are about."
Under the 'stage four' restrictions, Melbourne residents will only be allowed to exercise for an hour a day and can't travel more than 5km from home for the purpose of shopping.
Only one person from each household will be able to go to the shops each day.
Metropolitan Melbourne will be under a nightly curfew, between the hours of 8pm to 5am, from Sunday night with some exemptions for those providing care and travelling to and from work.
He said it was with some regret from midnight next Wednesday regional Victoria would move to stay at home restrictions and restaurants, cafes, gyms and bars would need to close.
He said businesses could return to take-away only.
From Wednesday, all Victorian schools will return to remote and flexible online learning, but special schools and children of essential workers could still attend.
He said more students would be allowed at regional schools because more parents would e working.
Under the new restrictions, a curfew will be in place in Metropolitan Melbourne from 8pm to 5am.
Residents will not be allowed beyond five kilometres from their home.
Earlier today, the NSW premier "strongly recommended" all NSW residents wear face masks.
Premier Gladys Berejiklian said while it was not compulsory NSW residents should wear masks in public when social distancing couldn't be guaranteed such as on public transport or in a grocery store.
Ms Berejiklian urged customer-facing staff to wear masks, as well as residents attending a place of worship and anyone in areas where there was high community transmission.
"I can't stress enough that the next few weeks will make or break us in terms of the way we get through this pandemic and that's why I'm urging everyone to take this advice," she said.
Yesterday, Mr Andrews announced only 397 cases of COVID-19 were detected but three people had died.
Mr Andrews the number was daily number was "significant" but there is a growing concern among the community transmission numbers.
"To those who are not following the rules you need to think for a moment," Mr Andrews said.
"This will not end anytime soon if people don't follow those rules."
NSW recorded its first coronavirus death in more than a month.
An 83-year-old man died after being diagnosed with the virus and NSW Health said his source of infection was the Crossroads Hotel.