Video report by ITV News Midlands reporter Ben Chapman
The Derry and Strabane council areas are currently the only places to be put under the new restrictions, after infection rates rose there within three weeks to 323 per 100,000 population.
Hospitality businesses will be permitted to stay open for takeaway services and six people from two households will be allowed in the outside areas of the premises.
Hotels fall under the new restrictions and they will only be able to provide indoor services to guests staying overnight.
People will be urged to limit their use of public transport and work from home if possible, with all “unnecessary travel” within or to and from the Derry City and Strabane council area to be avoided.
The new hospitality measures in Derry and Strabane:
Pubs, cafes, restaurants and hotels are to close to indoor custom from next week but remain open to takeaway services.
Outdoor drinking and dining is permitted with six people from two households will be able to be outside the premises.
There are exemptions for weddings and funerals.
Hotels will only be permitted to provide indoor services to guests staying overnight.
People will be urged to work from home if possible and avoid all “unnecessary travel” within or to and from the Derry City and Strabane.
Households currently cannot meet indoors in Northern Ireland.
Stormont ministers agreed extra measures during a meeting on Thursday.
Northern Ireland’s First Minister Arlene Foster said: “I recognise that this news will come as a hammer blow to businesses in the north west.”
Curbs have also been imposed in neighbouring Co Donegal in the Irish Republic after the rapid advance of the virus over recent weeks.
Colin Neill, chief executive of pubs and restaurants group Hospitality Ulster, said it was a devastating blow.
“The imposing of further restrictions on top of tight legally enforceable rules will mean closure for many as they won’t be able to meet the requirement, such as outside space, and with the weather getting colder, this will no longer be viable.
“Donegal placed at Level 3 status means that this entire north west area will effectively limp along.”
On Thursday, Stormont’s Department of Health announced a further 259 cases of Covid-19.
Two further deaths have been recorded. Another death was also reported on Wednesday, taking the toll recorded by the Department of Health to 579.
On Wednesday, Stormont’s health minister Robin Swann ruled out an immediate two-week full lockdown – a so-called circuit breaker – but raised the prospect of such a move over the Halloween mid-term break, or potentially even earlier.
“We are now looking at a severe crisis full in the face,” he said.
“I can’t put this in any more stark terms – a crisis for our health and social care service and for many victims of Covid-19.”
Mr Swann added: “I am now more concerned about what lies ahead in the next few months than I have been since becoming health minister.”
Previously, extra measures were taken in Belfast and Ballymena in Co Antrim, after increases in infections.
Northern Ireland has restricted household mixing but gatherings in gardens of up to six people are allowed.