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Under a series of new measures announced by First Minister Mark Drakeford the two-metre social distancing rules are set to return in public places and workplaces.
Licensed premises will have to offer table service only, face masks will have to be worn and contact tracing details collected.
Outdoor events will be limited to 50 people, with 30 indoors – but numbers able to attend events such as weddings, civil partnerships, funerals and wakes will be determined by the size of the venue.
Mr Drakeford said the rules will come into force from 6am on Boxing Day and are a revised version of alert level two.
The regulations bring back protections in hospitality businesses, including licensed premises, and in cinemas and theatres when they reopen after the festive period. Nightclubs will also close.
The Night Time Industries Association described the measures as a “devastating blow” to the industry, and have urged the UK Government to reintroduce the furlough scheme.
Mr Drakeford said £120 million would be available for nightclubs, retail, hospitality, leisure and tourism businesses affected by the measures.
“We are facing a very serious situation in Wales. A wave of infections caused by the new, fast-moving and very-infectious Omicron variant is headed our way,” Mr Drakeford said.
“We will do everything we can to protect people’s health and livelihoods in Wales – this means taking early action to try and control its spread.”
There will be no restrictions on household mixing, but guidance will be issued about limiting the number of visitors, taking a lateral flow test before the visit, and meeting outdoors, if possible.
There will be a separate offence for large gatherings – more than 30 people indoors or 50 people outdoors – in private homes and gardens.
Mr Drakeford did not rule out introducing further restrictions in the new year, but said he hoped these measures would flatten the infection rate.
We are facing a very serious situation in Wales. A wave of infections caused by the new, fast-moving and very-infectious omicron variant is headed our way. We will do everything we can to protect people’s health and livelihoods in Wales – this means taking early action to try and control its spread.
First Minister Mark Drakeford
He denied Wales was on an “unstoppable journey to lockdown”, but said he cannot rule anything out either.
“If we need to do more, the Welsh Government will not stand back, we never have,” he said.
“These are difficult decisions; they are not always popular decisions but if the evidence says to us that more has to be done to prevent unnecessary deaths and avoidable harm, then that is what we will do.”
Mr Drakeford criticised what he has called the UK Government’s inaction over rising Omicron cases, claiming Boris Johnson and his Cabinet are “paralysed by their internal divisions”.
“I think the UK Government is in a state of paralysis about all of this. We’ve seen the reports of in-fighting within the Cabinet,” he said.
“There are, as I would see it, sensible voices urging the Prime Minister to act to protect the NHS and protect people’s lives as he has in previous waves.
“There are others who, I think, simply take a different view of the balance of risk here and are prepared to allow those risks to run.
“They are paralysed by their internal divisions and are unable to act on it.”
He added: “I heard the Prime Minister earlier this week in an interview say the position had never been more urgent.
“And asked what he was going to do about it, he said that he was doing nothing. Well, that would not be acceptable to me.”
Andrew RT Davies, Welsh Conservative Senedd leader, urged the Welsh Government to publish the figures which led it to take the decision to increase the restrictions.
“This is crucial information, and this should be done on a daily basis,” he said.
“Moving forward, we will also need to have a serious national conversation on how we learn to live with this virus and the increasing demands we, as a nation, put on our national health service.”
Dr David Bailey, chairman of the BMA’s Welsh Council, supported the announcement as it was the “best course of action to protect the public and prevent the NHS from becoming overwhelmed”.
“The pressure on staff over the next few weeks will be immense,” he said.
“They are already exhausted – bearing the brunt of almost two years of unprecedented, unrelenting pressures.”