© AFPFlights appear to be operating out of Milan's airports despite the quarantine
Anyone living in Lombardy and 14 other central and northern provinces will need special permission to travel. Milan and Venice are both affected.
Prime Minister Giuseppe Conte also announced the closure of schools, gyms, museums, nightclubs and other venues across the whole country.
The measures, the most radical taken outside China, will last until 3 April.
Italy has seen the largest number of coronavirus cases in Europe and reported a steep rise in infections on Saturday. The strict new quarantine measures affect a quarter of the Italian population and centre on the northern part of the country that powers its economy.
The death toll in Italy has passed 230, with officials reporting more than 36 deaths in 24 hours. The number of confirmed cases jumped by more than 1,200 to 5,883 on Saturday.
"We want to guarantee the health of our citizens. We understand that these measures will impose sacrifices, sometimes small and sometimes very big," Mr Conte said early on Sunday.
Under the new measures, people are not supposed to be able to enter or leave the whole northern region of Lombardy, home to 10 million people, except for emergency access. Milan is the main city in the region.
The same restrictions apply to 14 provinces: Modena, Parma, Piacenza, Reggio Emilia, Rimini, Pesaro and Urbino, Alessandria, Asti, Novara, Verbano Cusio Ossola, Vercelli, Padua, Treviso and Venice.
"There will be no movement in or out of these areas, or within them, unless for proven, work-related reasons emergencies or health reasons," Mr Conte told reporters.
"We are facing an emergency, a national emergency. We have to limit the spread of the virus and prevent our hospitals from being overwhelmed."
However transport in and out of the regions affected continues. At least seven flights from other European cities arrived at Milan's Malpensa airport on Sunday morning according to flight tracking websites.
Analysis by Mark Lowen, Rome correspondent
It was widely discussed here that the week that's just finished was critical to seeing if Italy's coronavirus response had managed to halt the spread. If the numbers had begun to tail off, it would have suggested the containment measures had worked. They haven't.
With cases still surging, the government has moved to the next stage - and it's a dramatic step up. It's not quite a complete lockdown - planes and trains are still running and access will be permitted for emergency or essential work reasons. But police will be able to stop people and ask why they're trying to enter or leave the areas covered.
The question is whether this is all too late. It's believed the virus was circulating in Italy for weeks before it was detected. And there have now been cases in all 22 regions of the country. The government is now taking the most extensive containment measures outside of China. But is this a case of trying to shut the stable door after the horse has bolted?
Until now only around 50,000 people in northern Italy had been affected by quarantine measures.
Last week the government announced the closure of all schools and universities across the country for 10 days.
What are the details of the new restrictions?
Weddings and funerals have been suspended, as well as religious and cultural events. Cinemas, night clubs, gyms, swimming pools, museums and ski resorts have been closed.
Restaurants and cafes in the quarantined zones can open between 06:00 and 18:00 but customers must sit at least 1m (3ft) apart.
People have been told to stay at home as much as possible, and those who break the quarantine could face three months in jail.
The plans echo China's forced quarantine of millions of people which the WHO has praised for halting the spread of the virus.
Italy has also said it will start recruiting retired doctors in an effort to combat the escalating outbreak.
What is the situation elsewhere?
The number of infections worldwide is almost 102,000, the WHO says, with nearly 3,500 deaths. Most of the fatalities have been in China, where the virus originated in December.
But the country on Sunday reported its lowest number of new infections in a single day since January - an indication that the virus's spread is slowing.
There were 40 new cases on Saturday, less than half the number reported on Friday. Twenty-seven new deaths were reported - the lowest figure in more than a month - and all were in Wuhan, where the outbreak began.
Iran, one of the worst hot-spots outside China, has now confirmed almost 6,000 infections and 145 deaths.
WHO chief Tedros Adhanom Ghebreyesus has called the spread of the virus "deeply concerning" and urged all countries to make containment "their highest priority".
In other developments:
- A hotel being used as a coronavirus quarantine facility in the Chinese city of Quanzhou collapsed, killing six people
- Pope Francis is to deliver Sunday's Angelus Prayer by livestream to avoid the usual crowds forming
- In the US, a cruise ship with 3,533 passengers and crew held off the coast near San Francisco after 21 people tested positive for the disease has been directed to the nearby port of Oakland
- An individual who attended a conservative political conference last week that President Trump and Vice-President Mike Pence spoke at has been confirmed to have the virus
- The Women's World Ice Hockey Championships in Canada have been cancelled
- In Saudi Arabia, access to the sacred Kaaba in Islam's holiest site Mecca remains blocked
In the US more than 400 cases have been reported, and the death toll is 19.
In New York, cases jumped from 44 on Friday to 76 and Governor Andrew Cuomo declared a state of emergency.
South America recorded its first coronavirus death - a 64-year-old man in Argentina.
In Australia, a man in his 80s became the third person to die there from the virus.
Among other countries to report a rise in the total number of cases are: France (to 949); Germany (795); Spain (441); the UK (209); the Netherlands (188).
Colombia, Bulgaria, Costa Rica, Malta, the Maldives and Paraguay have meanwhile all reported their first cases.
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