The city will join neighbours Birmingham and Sandwell on the local lockdown list after cases increased by “five-fold” in a fortnight.
Residents will be banned from socialising with other people outside of their own households or support bubble in private homes and gardens.
The measures were requested by Wolverhampton Council and MPs from the city, and were brought in following a spike in cases of the coronavirus.
Health Secretary Matt Hancock said: "I know these restrictions will make everyday life harder for many, but I know that residents will work together and respect the rules so we can reduce rates of transmission.
"I urge local people to isolate and get a test if you have symptoms, follow the advice of NHS Test and Trace, and always remember ‘hands, face, space’.
"By sticking to these steps, we will get through this together."
Wolverhampton Council said there were around 60 cases per 100,000 residents in the seven days to September 12 compared to 12.6 cases per 100,000 in the week to August 29.
The council said some 90 per cent of cases are linked to household-to-household transmission.
Although the measures aren't coming into force until Tuesday, the city council has urged residents to abide by the restrictions immediately.
Ian Brookfield, the leader of the council, said: “All the evidence shows that close contact within the home or between households is a major cause of the spread of Covid-19, and that’s why for the last few days we’ve been urging households to stay apart from one another.
“We urge residents to continue to support our plea not to visit other households – this will be the law from Tuesday.
“These measures are like those which were in place at the height of the pandemic and the message is simple; you mustn’t allow people who are not part of your household or bubble into your home or garden, or go to visit them in their house or garden in Wolverhampton or elsewhere.
“We’ve all had to do this before; now we need to do it again if we are to stop the spread of coronavirus, keep our loved ones safe and protect jobs and our economy. Please play your part and together we will get through this.”
John Denley, Wolverhampton’s director of public health, said: “Everyone in Wolverhampton has a role to play in the fight against coronavirus and we need everyone to take these new restrictions extremely seriously in order to protect each other and keep everyone safe.
“The new rules are mandatory, so please follow them.”
West Midlands infection rate doubles
Across the West Midlands the infection rate has doubled in seven days, with local government officials admitting testing capacity is being strained.
Between September 7 and September 14 the infection rate increased from 20.2 people per 100,000 to 43.8, a media briefing was told on Friday.
The West Midlands Combined Authority briefing was told that Birmingham remains the region with highest rate [95.1] followed by Solihull [73.5].
Sandwell [57.4] was third highest - and highest in the Black Country - followed by Wolverhampton [60.3], Walsall [31.4] and Dudley .
More Covid-19 coverage:
Clive Wright, regional convenor for coronavirus, said: "This is significant and indicates that Covid-19 is spreading fast.
"We are now seeing Covid-related admissions to hospital and this should be a salutary reminder that we are tackling a killer disease.
"Birmingham, Sandwell and Solihull remains in intervention within the Government's framework and Wolverhampton will now be escalated to the same level."
He continued: "Continuing to follow guidance is critically important.
"Each of us must continue to follow guidance by social-distancing, wearing a face covering, stick to bubbles and washing hands frequently.
"I must emphasise in the strongest terms possible that we simply can't afford to be complacent at this juncture.
"The stakes are too high and we go forward."
The briefing heard that testing is now "outstripping the capacity of our laboratories nationally and locally," he added.
"Consequently tests are being prioritised in places where it is most needed, including authorities in the West Midlands."
It was also confirmed that there are no immediate plans for Dudley and Walsall to have restrictions imposed like those in Sandwell and Wolverhampton.
"I don't think we will be pushing those authorities next week," Mr Wright said.
Asked how long the restrictions will be in place for, West Midlands Mayor Andy Street said: "As long as it takes. There is a review every week of the progress in all areas. We have to see progress.
"It is not for a set period."
Elsewhere in Midlands
Meanwhile Oadby and Wigston in Leicestershire have also gone back into lockdown – with the county council’s director of public health saying the rise “underlines that residents need to change their behaviour”.
Rates in Oadby and Wigston increased up to 145 per 100,000 people, over three times the national and Leicestershire averages, placing it second in the country.
Leicestershire County Council said more than half of the cases in the last week are clusters in households.
The Government also added the nearby district of Blaby to its watch-list as an “area of enhanced support” after cases rose to 65 per 100,000 people.
Commenting on the new restrictions in the region, Leicestershire County Council’s director of public health Mike Sandys said: “This steep rise is off the scale – and underlines that residents need to change their behaviour.
“We know that the virus is spreading in communities so it makes sense for the Government to restrict mixing between households. This will be tough.
“But with no one source of infection, it really is down to us to stop the increase. Whether you’re on the school run, travelling to work, in the office or going out for a drink, follow the guidance.
“The route out of this is changing our behaviour.”
Also giving his reaction, county council cabinet member for health, Councillor Lee Breckon, said: “The rates are startling and we need to get the rise under control.
“I know increased restrictions are the last thing residents want. But it’s clear the virus is spreading in the community – and this is a pragmatic step targeting the main cause of transmission.
“We’re doing everything we can to stem the rise and I’m urging residents to play their part. By doing so, you’re protecting yourselves, your loved ones and your livelihoods.”
The Government said those shielding in Leicester city would no longer need to from October 5.
Tough new Covid-19 lockdown measures banning people from mixing in homes and gardens was imposed on Birmingham in response to a rocketing infection rate on September 15.