All hospitality premises in Wales will have to close from 6pm on Christmas Day ahead of the country moving into a stay-at-home lockdown on 28 December.
First minister Mark Drakeford said there had been a "sustained rise" in coronavirus cases in Wales since Friday, with one in five people now testing positive.
He said the whole of Wales must move from alert level three to four after Christmas, which means people will be expected to stay at home and only travel for essential reasons.
All non-essential retail, leisure and fitness centres will close at end of trading on Christmas Eve.
From 28 December stricter level four rules will be brought in on household mixing, holiday accommodation and travel. The measures will be reviewed after three weeks.
Drakeford said the situation in Wales was so serious that only two households will be advised to mix during the 23-27 December Christmas relaxation period.
Further financial support will be made available for businesses affected by the lockdown, with details to be confirmed by the end of this week. This is on top of the £340m already announced by the Welsh government.
Drakeford said: "Allowing hospitality to continue until 6pm on Christmas Day protects the plans people have made, particularly those who are lonely and isolated, and allows the industry itself to come to an orderly close."
Welsh pubs, bars, restaurants and cafés have been subject to a 6pm curfew and banned from serving alcohol since 4 December.
Hospitality business owners have warned they face a struggle to survive into the new year, with many choosing to close for Christmas rather than try and trade under the restrictions.
Drakeford added: "The situation we are facing is extremely serious. I'm making this announcement today to give everybody the most notice we can of the changes that will follow.
"This year has been unlike any we have ever known and the weeks ahead will be very difficult. But the year ahead does bring some promise as more people receive the vaccine."