The Nordic nation joins a small but growing number of countries, including Denmark and Britain, which have removed all domestic restrictions limiting the spread of the coronavirus.
"It is 561 days since we introduced the toughest measures in Norway in peacetime ... Now the time has come to return to a normal daily life," Prime Minister Erna Solberg told a news conference.
The restrictions would end at 4pm on Saturday (local time), she said.
The decision to no longer require social distancing will allow culture and sports venues to utilise their full capacity, rather than just a portion of seats, while restaurants can fill up and nightclubs reopen.
Solberg had so far implemented the first three stages of a four-step plan to remove social and economic restrictions imposed since March of last year, but the final step was postponed several times amid worries over infection rates.
"In short, we can now live as normal," Solberg said.
Some 76% of all Norwegians have now received at least one dose of a Covid-19 vaccine, while 67% of the population is fully vaccinated, according to the Institute of Public Health.
"Even though everyday life is now back to normal for most people, the pandemic is not over. People will still get sick and therefore it is important that everyone gets vaccinated," she added.
She warned, however, that those who do contract Covid-19 must still go into isolation to avoid spreading the virus.
Travel restrictions will also be relaxed, and the government will no longer advise against travelling outside of Europe.
Some restrictions will still apply to those arriving from countries considered to have a high rate of infections, the government said.
Solberg thanked the different government agencies involved in the response as well as the general public.
"I want to say: Thank-you very much, Norway," she said.
