"This is not an easy choice, closing borders and putting in place restrictions is never an easy choice to make, and certainly not one we wanted to make and be announcing on a day that is suppose to be about celebrating," she said.

Ms Allan said there had now been eight coronavirus cases linked to an outbreak that contact tracers believe began on December 21 when someone who had returned from NSW dined at a restaurant at Black Rock in Melbourne's south-east.

She urged Victorians still in NSW to return home before the border closure at 11:59pm on Friday.

Those who arrive in the 24 hours before the border closes will still need to take a test and go into quarantine for 14 days, she said.

"Obviously this is going to cause some disruption for Victorians who may be holidaying," Ms Allan said.

"We do apologise for this disruption, however as I said, these difficult decisions are about protecting our community."

She said Victorians who arrived back from NSW after the border closure would need to go into hotel quarantine.

Those from the Blue Mountains and Wollongong areas will be barred from entering Victoria from midnight on January 1.

People travelling from those areas before then must apply for a new permit, be tested within 24 hours of arriving in Victoria and self-quarantine at home for 14 days from when they left the respective New South Wales regions.

Victoria's border is already closed to the Northern Beaches, Greater Sydney and NSW Central Coast regions.

New Year's Eve gathering restrictions

Earlier, the Government announced new coronavirus restrictions from 5:00pm tonight, which will limit private home gatherings to 15 visitors and make mask use indoors mandatory.

Ms Allan said that meant people who had planned New Year's Eve gatherings for tonight based on the existing limit of 30 guests would need to reduce their numbers.

Under the existing rules, dependents are counted among the 15 household visitors unless they are less than one year old.

Masks will be mandatory for Victorians when indoors at any location outside their own home from 5:00pm, except when they are eating or drinking.

"We certainly do apologise to people who have put plans in place, who were looking forward to having events … but this is a necessary step, it's on the advice that we've received overnight," she said.

Ms Allan said the only people who should be travelling into Melbourne's CBD for New Year's Eve were those who had already made reservations at a hospitality venue.

The announcement comes after health authorities recorded three new coronavirus cases in Melbourne yesterday, bringing to an end the state's 61-day streak of zero locally acquired cases.

Department of Health and Human Services (DHHS) COVID-19 response commander Jeroen Weimar said those three cases had done the right thing by coming forward and being tested as soon they experienced symptoms, allowing authorities to discover the cluster.

"We've currently contacted 52 close contacts of those three individuals," he said, which Ms Allan later said had grown to 70 close contacts in quarantine by the afternoon.