Greater Sydney, Wollongong and the Central Coast will go into a two-week lockdown from 6pm.
NSW Premier Gladys Berejiklian made the announcement after another 12 locally acquired COVID cases were recorded in NSW and more exposure venues were identified.
That lockdown will last until midnight on Friday, July 9.
“We don’t want to impose burdens unless we absolutely have to, unfortunately, we have to,” Ms Berejiklian said.
The decision comes after the NSW government held a cabinet crisis meeting.
Residents in the affected areas will only be able to leave home for essential reasons, Premier Gladys Berejiklian announced after a crisis cabinet meeting.
People may only leave their homes for work, to shop for essential items, to seek medical care, or for caregiving or compassionate reasons.
“The NSW government has always prided itself on taking the expert health advice,” Ms Berejiklian said.
“Even though we don’t want to impose burdens unless we absolutely have to, unfortunately, this is a situation where we have to.”
It comes after another 12 new cases were recorded in NSW and exposure venues spread beyond the designated hotspot areas to communities including the northern beaches and western Sydney, where people have potentially been infectious for days.
Some 29 cases were recorded in the 24 hours to 8pm on Friday, 17 of which had already been announced, taking the cluster to 80 cases.
More than half were not in isolation from the beginning of their infection period.
“What we’re finding is by the time we’ve got to some of those cases, they’ve already on-transmitted,” Chief Health Officer Kerry Chant said.
“That means there have been a number of people that have been infectious in the community unknowingly for a period of time.”
Health Minister Brad Hazzard also pleaded for patience and co-operation as authorities determine how best to reign in the outbreak.
“The Delta variant is proving to be a very formidable foe,” he said.
“No matter what defensive steps we’re taking at the moment, the virus seems to understand how to counter attack.”
Mr Hazzard stressed the importance of avoiding any unnecessary travel during the lockdown.
Ms Berejiklian said support for businesses would be announced in coming days, along with the federal government’s COVID-19 disaster payment.
She urged people not to panic buy, or stress about money with shops to remain open and financial assistance to be available.
“It’s never easy when all of us have to face these circumstances, but we’re all in the same situation.
“We’ve had to do this before. We know the drill.”
Authorities will reassess the need for the lockdown in a week, but Ms Berejiklian said it’s unlikely to be shortened.
“We could assess after seven days but I want to be very upfront with the public: this will be for all intents and purposes a two-week lockdown,” she said.
“I don’t want to take away from that but if there is a dramatic change and the health advice says that we can get out of a lockdown earlier (we may) but I’m not anticipating that.
“The best advice from Health is that we should brace ourselves for additional cases.”
Restrictions have also been introduced for regional NSW.
No more than five visitors are allowed for a household each day, masks are required indoors and restrictions apply to weddings and funerals.
All hospitality has to be seated and the one person per four square metre rule has been revived, while outdoor events are allowed to operate at 50 per cent capacity.
The restrictions are required to ensure the virus doesn’t take hold in the regions if Sydney travellers unknowingly spread it there, the Premier said.