Announcing the state of disaster proclamation, Daniel Andrews said the rules gave police greater powers following a six-week increase of cases in the region.
It comes as seven people have died and 671 have contracted the strain since Saturday.
“If we don’t make these changes, we’re not going to get through this,” Mr Andrews said.
“We need to do more. That is what these decisions are about.”
He explained there would be more announcements about workplaces on Monday, including the closure of certain industries.
“I want to ensure all Victorians – supermarkets, the butcher, the baker, food, beverage, groceries, those types of settings – there will be no impact there,” he added.
Melbourne residents will only be allowed to shop and exercise within three miles of their homes. All students across the state will return to home-based learning and child care centres will be closed.
The deaths in Victoria took the national toll to 208.
New South Wales also confirmed its first coronavirus-related death in more than a month on Sunday as authorities sought to suppress a number of growing clusters at a hotel and several restaurants in Sydney.