Victoria state Premier Daniel Andrews chastised people for ignoring guidelines on social contact by engaging in behaviour such as kissing and hugging as he reimposed a limit of five people visiting households and 10 people at public gatherings.
The restrictions, which come into force on Monday and will last until July 12, reverse a relaxation of the rules at the start of this month that had allowed for home and outdoor gatherings of up to 20 people.
"It is unacceptable that families anywhere in our state just because they want this to be over pretend that it is. It is not over," Andrews said at a televised media conference, noting a rise in family transmissions since April.
State officials reported 25 new COVID-19 cases on Saturday, including families who had held gatherings and workers at a hotel where travellers had been quarantined.
Victoria is responsible for around a quarter of Australia's total reported 7,400 cases but is driving a recent uptick in active cases.
While some of the country's states and territories have reached zero active cases, Victoria's has spiked to 116.
"We are absolutely at risk of a second peak but we can get on top of it," Victoria chief health officer Brett Sutton said.
Andrews warned that suburbs found to be viral hotspots could face stricter lockdowns.
The state will also defer plans to expand numbers at cafes and restaurants from 20 to 50 people by three weeks to July 12. However, gyms will be allowed to reopen from Monday as planned.
The Australian Football League (AFL) called off a game scheduled to take place in Melbourne on Sunday after a player tested positive. The AFL has recently restarted fixtures, playing in empty stadiums.
Australia has reported just 102 deaths related to COVID-19, a relatively low number on a global scale.
