Some five million residents in Australia’s largest city have been under stay-at-home orders since late June, but infections have still more than doubled in the last week.
There were 642 new cases recorded on Friday and 681 on Thursday - the country’s highest daily infection rate since the pandemic began. The most recent outbreak has killed 65 people, authorities said.
From Monday, two million residents in the suburbs of Sydney where the Delta variant is spreading most will have to live under a daily curfew and told to be at home between 9pm and 5am.
New South Wales (NSW) Premier Gladys Berejiklian said: "I apologise to the vast majority of people in those communities who are doing the right thing but for our health and safety moving forward we need to make these difficult decisions.”
More than half of Australia’s 25 million people are now living in lockdown after Delta outbreaks also hit Melbourne and Canberra.
Restrictions outside Sydney are due to be eased on August 28.
However the residents of 12 Sydney suburbs, which include the city’s poorest and ethnically diverse communities, will face harsher restrictions.
Along with the curfew, people in these areas will be limited to just one hour of exercise daily.
The measures are being put in place to prevent more people "losing loved ones", Ms Berejiklian said.
Critics have argued the government should have acted more effectively to tackle the Delta outbreak early on and ensured a smoother vaccine rollout.
Australia has recorded 971 deaths from Covid and just over a quarter of the population are fully vaccinated.
