The country will be divided into three Local COVID Alert Levels - "medium", "high" and "very high" - depending on local infection rates.
The move is aimed at simplifying the range of different COVID-19 restrictions that were already in place across various parts of England.
The prime minister warned the "stark reality" of a second wave of coronavirus infections had seen the number of cases quadruple in the last three weeks, with more people now in hospital with the disease than had been before the UK entered its national lockdown in March.
However, Mr Johnson told MPs he did not believe it would be the "right course" to put the country back into national lockdown due to the impact of shutting schools on children's education and the harm to the economy of closing a vast swathe of businesses.
He also dismissed suggestions that the public's patience for restrictions had now been "exhausted" and the government should "let the virus rip" across the country and "let nature take her course".
And he argued that shielding the vulnerable and elderly while allowing the virus to take hold among younger people was "no answer".
"Because the virus would then spread with such velocity in the general population that there would be no way of stopping it from spreading among the elderly," the prime minister added.
Mr Johnson said the country was already suppressing the R rate of infection "well below its natural level", but added: "We need to go further."
There were 13,972 new cases of coronavirus in the UK announced on Monday, with 50 more deaths recorded of people who tested positive within the previous 28 days.
Explaining the new system, Mr Johnson said the medium level will cover a significant part of England and includes the current national restrictions such as the "rule of six" and the 10pm curfew for pubs, bars and restaurants.
The high level will see people prevented from socialising with other households indoors, although support bubbles will still be permitted.
In these areas, the rule of six will continue to apply outdoors in public spaces, as well as private gardens.
Most of those areas already living under local restrictions - such as Greater Manchester and Birmingham - will move into this category.
The prime minister said that, following rising infection rates, Nottinghamshire, East and West Cheshire, and a small area of High Peak will move into the high level.
The very high alert level will see people banned from socialising with other households both indoors and in private gardens, while bars and pubs will be closed unless they can operate as restaurants.
Alcohol could be served in pubs operating in restaurants in these areas, but only as part of a meal.
Residents will also be advised against travelling in and out of these areas, while it will be up local politicians as to whether other leisure venues such as gyms and casinos should also close.
However, non-essential shops, schools and universities will remain open.
Mr Johnson told MPs that the Liverpool City Region will be placed in the very high level and, following talks with local leaders, that gyms, leisure centres, betting shops and casinos will also close in the region.
He highlighted how Chancellor Rishi Sunak last week announced further economic support for those businesses forced to shut due to local restrictions.
In very high areas, the NHS "could soon be under unbearable pressure without further restrictions", the prime minister warned.
Mr Johnson told MPs that the months ahead will "test the mettle" of the country, but he said he had "no doubt at all that together we will succeed".
Labour leader Sir Keir Starmer said he was "deeply sceptical that the government has actually got a plan to get control of this virus, to protect jobs, or retain public trust".
"The question today is whether the restrictions announced by the prime minister can bring the country back from the brink, whether they can regain control of the virus and provide the support and confidence that local businesses and communities need," he said.
"That is how high the stakes now are."
The prime minister set out the details of the new three-tier system in the House of Commons after chairing a meeting of the government's emergency COBRA committee on Monday morning.
Mr Johnson will hold a news conference with Chancellor Rishi Sunak and England's chief medical officer Chris Whitty later on Monday.
England's deputy chief medical officer, Professor Jonathan Van-Tam, gave a public briefing on the latest coronavirus infections across the UK.
He revealed that NHS Nightingale hospitals - set up during the first peak of COVID-19 infections to stop the health service becoming overwhelmed - are being told to prepare to start accepting patients in Manchester, Sunderland and Harrogate.
MPs are expected to be given a vote to approve the new three-tier system on Tuesday.