Speaking in a video message posted on his official Facebook page, Italian Prime Minister Giuseppe Conte announced all factories not producing essential goods would be shut down.
Supermarket, pharmacies, public transportations, banks and post offices will remain open, and all jobs and activities related to food distribution and essential public services will continue.
The new measures are more draconian than the initial lockdown, which began two weeks ago.
The prime minister said: "We are slowing down the productive engine of the country, but we won't stop it.
"It is not an easy decision, but it is a decision that prepares us to tackle the most severe moment of the contagion.
"This decision is necessary today in order to contain the spreading of the epidemic as much as possible.
"The health emergency, as we foresaw, is turning into a full economic emergency, but I want to say to all of you that the state is here, the state is present.
"The government will take extraordinary measures that will allow us to stand up again and restart as soon as possible."
Coronavirus: Everything you need to know
For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough.
For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia.
The vast majority of people recover from the new virus.
According to the World Health Organization, people with mild illness recover in about two weeks, while those with more severe illness may take three to six weeks to recover.
Worldwide, the new virus has infected more than 303,000 people and killed more than 12,940.