Anyone living in Lombardy and 14 other central and northern provinces will need special permission to travel. Milan and Venice are both affected.
Prime Minister Giuseppe Conte also announced the closure of schools, gyms, museums, nightclubs and other venues across the whole country.
The measures, the most radical taken outside China, will last until 3 April. Italy has seen the largest number of coronavirus infections in Europe, with the number of confirmed cases jumping by more than 1,200 to 5,883 on Saturday.
Among the latest people to test positive is the army’s chief of staff. Salvatore Farina said he felt well and was self-isolating.
The strict new quarantine measures affect a quarter of the Italian population and centre on the rich northern part of the country that powers its economy.
Under the new measures, people are not supposed to be able to enter or leave Lombardy, where Milan is the main city.
The same restrictions apply to 14 Italian provinces: Modena, Parma, Piacenza, Reggio Emilia, Rimini, Pesaro and Urbino, Alessandria, Asti, Novara, Verbano Cusio Ossola, Vercelli, Padua, Treviso and Venice.