An evening curfew will be in place throughout the state capital, Melbourne, from 8:00 p.m. to 5:00 a.m.
Those who live in the city will only be allowed to shop and exercise within 3 miles of their home, and all students in the state will return to home learning.
Day care centers will also close.
State Prime Minister Daniel Andrews said the state of disaster proclamation gave police greater powers.
Mr Andrews said 671 new coronavirus cases had been detected since Saturday, including seven deaths.
Melbourne could be placed under a six-week period of tighter constraints, including the almost complete shutdown of its public transport network, starting Wednesday, according to The Sunday Age.
Mr Andrews will announce the new measures over the next two days, according to The Sunday Herald.
The restrictions would include shutting down more businesses selling non-essential products.
The state of disaster was declared after a steady rise in deaths and infections over the past six weeks in Victoria.
Deaths in the state brought Australia’s national death toll to 208.
Mr Andrews said: “If we don’t make these changes, we’re not going to get away with it.
“We need to do more. That’s what these decisions are about. “
He added that there would be more announcements at workplaces on Monday, including the shutdown of some industries.
Mr Andrews continued, “I want to make sure that all the Victorians – the supermarkets, the butcher, the baker, the food, drink, groceries, those types of settings – won’t have any impact there. ”
New South Wales on Sunday confirmed its first coronavirus-related death in more than a month as authorities sought to suppress a number of growing clusters at a hotel and several restaurants in Sydney.
The measures in Victoria come as the number of coronavirus cases in India has crossed 1.75 million with another peak of 54,735 in the past 24 hours.
New cases in India are down from 57,118 on Saturday.
The country’s health ministry also reported 853 deaths on Sunday for a total of 37,364.
Randeep Guleria, a senior government expert, said New Delhi and Mumbai may have crossed their highs with downward trends.
July alone accounted for more than 1.1 million cases in India.
South Korea has reported 30 more cases of the coronavirus, most of them associated with international arrivals.
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The cases announced by the Korea Centers for Disease Control and Prevention on Sunday brought the national toll to 14,366 with 301 deaths.
The agency said eight of the newly confirmed cases were infected locally, while the rest came from overseas.
South Korea has recently seen an increase in the number of imported cases, many of which are South Korean construction workers airlifted out of virus-ravaged Iraq and crew members of docked Russian-flagged freighters in local ports.
Health officials have said imported cases are less threatening as they continue to apply two-week quarantines to all people arriving from abroad.