"We recommend to people in Leicester stay at home as much as you can, and we recommend against all but essential travel to, from and within Leicester".
This means the city's bars, restaurants and hairdressers will not open on 4 July, unlike the rest of England.
"These Leicester-specific measures will apply not just to the city of Leicester but also the surrounding conurbation including, for example, Oadby, Birstall and Glenfield".
The changes will require new legislation to be drafted before they can be implemented.
Matt Hancock has said the government would take further action in locking down Leicester if necessary, after restrictions were tightened again following a local outbreak.
If you've ever played Pandemic, basically you've picked up the Leicester card when the city was already fully-cubed, and now it's spewing cubes all over its neighbours. There is also no clarity about what extra resources will be put in place to increase testing capacity and what financial support will be available to businesses.
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"These sort of much more targeted measures have worked in other outbreaks".
Schools will close to most pupils from 2 July, and the relaxation of shielding planned for 6 July will not happen.
City Mayor Sir Peter Soulsby met with the health secretary and other officials yesterday to discuss the latest data and actions needed.
Additional funding will be given to both Leicester and Leicestershire councils to enable them to "enhance their communications and ensure those communications are translated into all locally relevant languages" and support those who need to self isolate, Hancock said.
Leicestershire County Council leader Nick Rushton said it made sense to step up restrictions in areas close to the city.
"We have got the biggest ethnic minority population of any city, so you have multi-generational households where the young people have probably been out socialising in breach of the lockdown".
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Sir Peter said: "The Secretary of State (Matt Hancock) announced that he believed there was an outbreak in Leicester the best part of two weeks ago".
"Last week we also started securely sharing postcode-level testing data with all local authorities including Leicester, so it is available to them continuously and at any time".
Mr Hancock said Leicester accounted for "10% of all positive cases in the country over the past week". In England too, the number of corona patients is constantly increasing.
Leicester now has three mobile testing sites in the city in Evington, Spinney Hill Park and Victoria Park, and a more permanent facility on the edge of Leicester at the Birstall park and ride site.
A new walk-in centre will be opened and everyone with symptoms in the city is being urged to have a test.
The city council is now reviewing its plans to extend the opening of its own buildings such as libraries, museums and children's centres.
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However, he said some colleagues "have had to spend quite a lot of time persuading the people actually on the ground doing the testing that the Secretary of State said they should stay in Leicester". They said a rise in local infections had been evident for nearly two weeks, but the central government had not shared the data promptly with public health authorities in Leicester.