Anyone over 12-years-old who hasn't had the jab will have to remain at home, except for basic activities like working, shopping, going for a walk - or getting vaccinated.
It leaves around 2 million Austrians in lockdown - from a population of 8.9 million.
"It’s our job as the government of Austria to protect the people," Chancellor Alexander Schallenberg told reporters in Vienna on Sunday.
"Therefore we decided that starting Monday, there will be a lockdown for the unvaccinated."
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Authorities are concerned rising infections and deaths will put hospitals under too much pressure to be able to treat people.
Additional police resources have been assigned to enforce the lockdown which is initially set to last for 10 days.
Officers will be on patrol, checking those outside have been vaccinated.
Unjabbed people who break lockdown rules will be fined around £1240 (€1,450).
Why are only unvaccinated people in Austria being told to stay in?
The country has one of the lowest vaccination rates in Western Europe, with only around 65% of the total population is fully vaccinated.
In recent weeks, Austria has faced a worrying rise in infections.
Authorities reported 11,552 new cases on Sunday, the week before there were 8,554 new daily infections.
Deaths have been increasing in recent weeks too. On Sunday, 17 new deaths were reported bringing Austria’s total pandemic death toll to at least 11,706.
The seven-day infection rate stands at 775.5 new cases per 100,000 inhabitants - for context neighbouring Germany has a rate of 289 per 100,000, a figure which has already prompted concern there.
The UK's most recent seven-day infection rate is 354.6 new cases per 100,000 people.
Austria's chancellor has called on people who have been vaccinated to get their booster shot, saying that otherwise "we will never get out of this vicious circle."