NSW will require masks to be worn indoors and has asked people to work from home where possible as it battles record COVID cases.
The new rules will apply from midnight Thursday.
Density limits will also be introduced across the state from December 27, while QR check-in codes will return in some settings.
Premier Dominic Perrottet announced the changes on Thursday afternoon – reversing his long-held view that masks would not be mandated, and check-ins were not needed.
“We’ve always said as we have moved through this that we will monitor the situation and the evidence in front of us. The key indicators to us are not the case numbers but rather ICU numbers, hospitalisations and, in addition to that, importantly, the ability of our healthcare workers … to provide the care that people need if they’re seriously ill,” he said.
“What we’re seeing at the moment is that many of our health workers – around 1500 just today – are either sick or unable through testing requirements to be able to come into work.”
The backdown came as NSW confirmed a record 5715 COVID infections on Thursday – almost as many recorded across the entire country on Wednesday.
The cases were diagnosed from more than 160,000 tests in the 24 hours to 8pm on Wednesday and represent an increase of 1952 from Tuesday.
The figure is just shy of the 5725 cases reported across Australia on Wednesday.
One death was also reported in NSW on Thursday.
The number of virus patients in NSW hospitals has climbed to 347, up 45. They include 45 in intensive care.
There were also record COVID spikes in other states on Thursday, with Queensland’s infections spiking to 369, South Australia with 484, Tasmania reporting a pandemic-high of 26 and the ACT 85.
In Victoria, masks were made mandatory in more settings, including when moving around at large events, as its cases leapt to a two-month high of 2005.
Mr Perrottet said NSW would also supply rapid antigen tests free from 2022, to help ease some of the pressure on the PCR testing system.
The changes in NSW will remain until at least January 27.
They include the return of the two-square metre rule in hospitality venues from December 27. Check-ins will also be required in hospitality, along with supermarkets and shops.
Since lifting most restrictions on December 15, Mr Perrottet had struck a confident note and urged residents to take “personal responsibility” and help lead the nation out of the pandemic.
But cases have spiked since, with more than 20,000 testing positive since December 16 and testing clinics being overwhelmed.
Only 52 per cent of cases were notified to NSW Health by laboratories within one day of sample collection in the week ending December 19, down from 85 per cent the previous week.
While 94 per cent of cases were fully interviewed by NSW Health within one day of notification the previous week, now only 54 per cent are.
The surge in cases has also led the number of healthcare workers in isolation to nearly triple – from 459 to 1364 – in a single week.
The dramatic spike in cases just two days before Christmas had already pushed the government to change its mind on mandatory check-ins to venues across the state.
But, despite the rise in cases, health advice indicated disease caused by the Omicron variant appeared about five times less severe than Delta, Mr Perrottet said.
Sydney remains the state’s epicentre of the virus, but transmission is also raging in the Hunter New England area, which has 976 new cases.
The South Eastern Sydney Local Health District has the most cases, with 1186 recorded in the last 24-hour period.
The district has just under one million residents, taking in suburbs such as Darlinghurst, Watsons Bay, Maroubra, Woollahra, Waverley, Randwick, Bayside, Kogarah, Hurstville and the Sutherland Shire.
One death, an unvaccinated man in his 40s with underlying health conditions, was recorded on Thursday.
The number of people in hospital has climbed to 347, up 45, with 45 in ICU, 13 of whom are on ventilators.
Most of the intensive care patients are unvaccinated.