Schools across the state will close for the duration of the lockdown, as will non-essential retail stores, dining-in service at restaurants and cafes, pools, gyms, hairdressers, beauty services and cultural and entertainment venues such as cinemas, tourism and art galleries.
"We've seen overseas what happens if this thing gets away", he said.
However, Victorians can only exercise or shop within a five-kilometre radius from their house. "When we see a member become infected, nearly all the household is infected", he said.
Earlier in the month a man tested positive to the virus after becoming infected while undergoing hotel quarantine in South Australia and then flying into Melbourne and returning to his home in Wollert.
Merlino said contact tracers have identified more than 10,000 primary and secondary contacts who would need to quarantine, test and self isolate, adding "that number will continue to grow and change".
Mr Merlino said he understood how hard the latest lockdown would be on Victorians, but said "we must follow public health advice".
The "circuit-breaker" lockdown is created to allow contact tracers to get on top of cases, with residents permitted to leave home only for essential reasons including getting vaccinated.
"If more people were vaccinated, we might be facing a very different set of circumstances than we are today".
Visitors to aged care facilities will be banned except for limited reasons, while visitors to hospitals will be restricted to those supporting a partner during birth, a parent accompanying a child, or end of life reasons. And masks must be worn everywhere.
Vaccination centres in Melbourne reached capacity on Wednesday as thousands of Victorians raced to get the jab after 11 new cases were recorded overnight taking the cluster in the city's northern suburbs to 26 infections.
Under the current rules, Victorians who are under the age of 50 can not yet get the shot.
One helpful outcome of the outbreak is that there has been an upsurge in Victorians getting vaccinated with 15, 858 people receiving their jab on Tuesday, whereas the previous average daily uptake was less than 6, 300.
"That is not a criticism, it is just a fact, we have had breaches in hotel quarantine right around our country".
Victoria has also expanded vaccination eligibility from today to people aged 40-49.
He also announced from tomorrow, dependent on supply from the federal government, all Victorians over 40 will be eligible for the Covid-19 vaccine.
Morrison urged eligible Australians to get vaccinated, saying the "wonderful and enviable" way of life Down Under during much of the pandemic had led to some vaccine hesitancy.
Prime Minister Scott Morrison batted away the criticisms, saying "no system is foolproof" and pointing to Australia's now low infection and death numbers when compared to other countries around the world.