The two areas have been moved up to Tier 2 along with Telford and Wrekin after a steep rise in the Covid infection rate, putting them under the same restrictions as the rest of the Black Country, Birmingham, Solihull, Coventry and Stoke-on-Trent.
The West Midlands is currently under consideration for Tier 3 measures, which could come in next week and would force pubs and bars that do not serve substantial meals to close.
Local leaders say the move to Tier 2 is necessary in order to get a grip on the virus and help protect the NHS, with Covid hospital admissions having trebled to 1,400 in the past month.
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In the West Midlands Combined Authority region and parts of Staffordshire, the number of cases rose by one third in a week to 8,675.
All areas now have an infection rate above 200 cases per 100,000 population – well above the Government’s Tier 2 trigger point of 140 cases per 100,000.
South Staffordshire’s rate is the highest in the region at 372.7 cases per 100,000 in the seven days to October 24, having more than doubled in the past week. A total of 419 cases were recorded.
Meanwhile Dudley’s rate over the same period was 228.9 per 100,000, after 736 cases were recorded.
Dudley South MP Mike Wood, said: “Moving into Tier 2 will obviously cause difficulties for a lot of families and businesses across Dudley, but I think most people understand that if these measures do make a difference in helping to save lives then it is a price we have to bear.
“It is important the restrictions are given a chance to take rather than immediately pushing Dudley towards Tier 3.”
Alan White, leader of Staffordshire County Council, called on people to “redouble” their efforts so as to “avoid any further restrictions and protect our county”.
He added: “We can, and we must rise, to this new challenge, but it is down to each and every one of us to stick to the new rules when they do come into force to help keep Staffordshire safe and open for business.”
The authority’s director of health and care, Dr Richard Harling, said the extra restrictions on mixing indoors “will hopefully help reduce the rate of infection”.
West Midlands Mayor Andy Street said that while rising cases and added pressures on hospitals were a major concern, no decision had yet been made on moving the region up to Tier 3.
He added: "However as you would expect there are active conversations between local leaders as to what would be needed from a Tier Three support package.
"It is critical we get this support agreed in advance so we could act decisively to protect people’s lives and livelihoods.
"I know many will question why there is talk of Tier Three despite our current rate of infection being lower than those in other parts of the country when they entered the highest tier of restrictions.
"But if our cases continue to rise we must protect our hospitals, and by acting before our cases reach the levels seen elsewhere we have a better chance of the restrictions working.
"It is clear the situation is becoming very serious and if further measures are to be avoided we must bring the rate of infection down. Everyone has a part to play in that."
Jane Stevenson, the Conservative MP for Wolverhampton North East, has urged the Government to announce "a clear exit plan" if it forces the city into further restrictions.
She said: "The infection rate in Wolverhampton is rising, so further restrictions are a real possibility if the rate does not come down.
"But we’ve already seen a significant impact on jobs and businesses in the city as a result of various measures such as the 10pm curfew and no household mixing indoors.
"So I am calling for a clear exit plan from any further restrictions, should they be introduced, so that people in Wolverhampton have some certainty that this isn’t going to last forever and that we will recover.
"The extra financial support from Government for Tier 2 areas is welcome, but we also have to look at ways of safely coming out of those restrictions so that businesses can return to some normality."
Councillor Patrick Farrington, the leader of Stafford Borough Council, said: "We now must work together to protect our older and vulnerable residents, keep our schools open, protect our NHS and ensure hospitals are not overwhelmed.
“We are at a critical point in fighting this pandemic and I am confident with the support of the whole community we can get back to medium alert soon – and that will be the best Christmas present we can give each other.”
Under Tier 2 “high alert” measures, mixing between different households or social bubbles is banned indoors, including in homes, pubs and restaurants.
Groups of up to six people can still meet outdoors in public spaces and private gardens.
The infection rate in Walsall in the seven days to October 24 was 311.4 (889 cases). It was 302.7 in Cannock Chase (305 cases), 291.4 in Sandwell (957 cases), 250.2 in Wolverhampton (659 cases), 220 in Stafford (302 cases), and 209.1 in Lichfield (219 cases).