The Victorian Government announced new coronavirus restrictions limiting private home gathering sizes to 15 and make mask use indoors mandatory.
The restrictions kicked in at 5pm (local time) this evening.
Meanwhile, Western Australia has closed its border to travellers from Victoria following the reporting of locally-acquired cases.
Acting Victoria Premier Jacinta Allan said that meant people who had planned New Year's Eve gatherings for tonight based on the existing limit of 30 guests would need to reduce their numbers.
"We certainly do apologise to people who have put plans in place, who were looking forward to having events… but this is a necessary step, it's on the advice that we've received overnight," she said.
Allan said the only people who should be travelling into Melbourne's CBD for New Year's Eve were those who had already made reservations at a hospitality venue.
The announcement comes after health authorities recorded three new coronavirus cases in Melbourne yesterday, bringing to an end the state's 61-day streak of zero locally acquired cases.
Department of Health and Human Services (DHHS) Covid-19 response commander Jeroen Weimar said those three cases had done the right thing by coming forward and being tested as soon they experienced symptoms, allowing authorities to discover the cluster.
"We've currently contacted 52 close contacts of those three individuals," he said.
"Those close contacts are across a wide area of Melbourne… and also include people in Leongatha and in Barwon Heads."
Weimar said three of those close contacts had since tested positive, bringing the total number of recorded community cases to six.
WA reintroduces hard border with Victoria
Western Australia has closed its border to travellers from Victoria, after the re-emergence of locally acquired coronavirus cases.
People coming from Victoria will no longer be able to enter Western Australia unless they are an exempt traveller.
Victoria had been classified a "very low-risk" state after 28 days of no community transmission, but it has now been reclassified a "medium-risk" state, meaning the new restrictions apply from midnight tonight.
Acting Premier and Health Minister Roger Cook said anyone who had entered WA from Victoria since December 21 would have to go into quarantine immediately for 14 days from the date of their arrival.
About 1500 people are expected to arrive from Victoria today or have already arrived.
They will have to get a Covid-19 test on day 11 after their arrival or if they develop symptoms of the virus.
Cases linked to restaurant in Melbourne's south-east
Allan said yesterday's cases all had either a direct or indirect link to the Smile Buffalo Thai restaurant at Black Rock on 21 December.
"One that night, one case and two close contacts of cases attended this restaurant, as did a returned traveller from New South Wales," she said.
Allan said the NSW traveller was being tested as a matter of urgency.
DHHS is regularly updating a list of public exposure sites on its website, which so far includes seven different locations with exposure periods dating from 21 December until 30 December.
DHHS has said anyone who visited any of the locations during the times indicated must get tested and isolate until they receive a negative result.
Victorians urged to leave all parts of NSW immediately
Health Minister Martin Foley said Victorians faced a "very serious situation" and it was clear the NSW outbreak had spread "well beyond the northern beaches".
Those from the Blue Mountains and Wollongong areas will be barred from entering Victoria from midnight on 1 January.
People travelling from those areas before then must apply for a new permit, be tested within 24 hours of arriving in Victoria and self-quarantine at home for 14 days from when they left the respective New South Wales regions.
Victoria's border is already closed to the Northern Beaches, Greater Sydney and NSW Central Coast regions.
Foley did not rule out further border restrictions and urged Victorians to consider whether they really needed to travel to New South Wales.
"Do not go to New South Wales. If you are in Victoria and if you are a Victorian in New South Wales, well beyond Wollongong and the Blue Mountains, come back," he said.
"You do not want to be caught on the wrong side of a rapidly evolving situation."
States bunker down
Western Australia has closed its border to travellers from Victoria, after the re-emergence of locally acquired coronavirus cases in Melbourne.
People coming from Victoria will no longer be able to enter Western Australia unless they are an exempt traveller.
Victoria had been classified a "very low-risk" state after 28 days of no community transmission, but it has now been reclassified a "medium-risk" state, meaning the new restrictions apply from midnight tonight .
The decision comes after Victoria announced it was closing its border with New South Wales from tomorrow night, and South Australia reimposed a hard border with Victoria.
-ABC