The Health Secretary Matt Hancock said the government had had to act fast - but local politicians have accused ministers of causing "confusion and distress" over the way the new rules were announced.
"So today I held a meeting of the Government's Gold Committee and working with local leaders including for instance Andy Burnham the mayor of Greater Manchester, we've decided that we need to action across Greater Manchester, East Lancashire and parts of West Yorkshire".
Plans to open casinos, bowling alleys and skating rinks on Saturday have been shelved.
People in the affected areas are still able to go to pubs and restaurants, but only with members of their own household.More news: Google Teases Pixel 4a Launch for 3rd August
"The picture in Greater Manchester has changed over the last seven days", he told the BBC.
He said all residents "young and old alike" should "protect each other" by observing the requirements, which will be reviewed weekly.
However, the new measures have come under criticism from the opposition Labour party.
Britain on Friday "put the brakes on" easing lockdown measures and imposed new rules on millions of households in northern England, following concerns over a spike in coronavirus infections.
The measures were introduced hastily during the start of the annual Eid al-Adha "feast of sacrifice", disrupting the celebration that marks the end of Ramadan for hundreds of thousands of British Muslims. Areas affected by the latest lockdown have significant Muslim populations.More news: Halo Infinite multiplayer will be free-to-play according to new leak
"We've demonstrated that we're prepared to take the actions necessary to keep people safe", the Metro newspaper quoted Hancock as saying on Friday to Sky News.
New UK statistics comparing how the virus struck various regions showed England recording the most excess deaths in Europe in the first half of 2020.
The same restrictions will also apply to the city of Leicester.
And 846 cases were reported - the highest number of cases in a day for a month, which took the total to 303,910.More news: One-Time US Republican Presidential Candidate Herman Cain Dies From COVID