All of New Zealand - except for Auckland - will move to alert level 2 at 11.59pm tomorrow, Prime Minister Jacinda Ardern has announced.
However, new level 2 rules will be introduced because of the danger presented by the Delta strain, including mandatory mask use in most public venues and patron limits at restaurants, bars and clubs.
A new Covid testing regime will also be introduced for MIQ staff and essential workers crossing Auckland's borders.
Schools outside of Auckland can reopen from Thursday morning, Ardern said at today's post-Cabinet press briefing.
Face masks must now be worn inside most public venues, including shops, malls and public spaces.
Mask-wearing in schools isn't mandatory, but director-general of health Ashley Bloomfield said it was recommended, especially for students 12 and older. The same applied to universities.
Masks could be removed at bars and restaurants for eating and drinking. However, staff would have to wear masks.
Ardern said new rules on scanning also applied at level 2: mandatory scanning at bars, restaurants, cinemas, churches, hairdressers and anywhere where there was close contact between people.
"To keep it simple, if you're out and about and visiting indoor venues, please wear a mask."
There would be a limit of 50 people at hospitality and event venues, while outdoor venues could have up to 100 people.
The old rules of customers being seated and separated would continue to apply.
At private events, a record had to be kept of people attending.
At indoor public facilities, such as gyms and libraries, the same rules would apply as for supermarkets: a 2m space would be required.
"Wear a mask, scan everywhere you go," Ardern said.
People needed to remember that venues were more limited in the numbers they could take, and should be patient.
"We are within sight of elimination, but we cannot drop the ball."
Ardern said the Delta level 2 restrictions would be hard on the hospitality industry, but it would also mean returning to level 1 sooner.
"We want to keep moving, but it will depend on how successful we are."
Businesses that were not customer-facing would have similar rules to pre-Delta level 2, Ardern said, but those businesses should remain mindful of how contagious Delta is.
"We've learnt from experience. It's the social events when people know one another, when they're indoors for long periods of time with socialising."
Cabinet would further review level 2 on Monday, along with Auckland's level 4 settings.
Two new locations of interest, meanwhile, were released at 6pm - the McKinnon Street Superette from 1pm-1.15pm on August 25; and the Richmond Road Pharmacy at Grey Lynn from 1.45pm to 2.15pm on August 30.
Auckland border checks
Bloomfield said there would also be twice-weekly testing of staff at quarantine facilities, and weekly testing would be introduced for workers who had to cross the boundaries around Auckland.
Those people would not be required to stay home while they waited for the results, unless they had symptoms.
Bloomfield said those workers would have to show a negative test result at the borders, under a spot-checking scenario.
Those tests would be nasal swabs initially, but the health ministry was working to allow saliva testing to be rolled out for those essential workers crossing the borders.
There were about 3000 essential workers out of 22,000 such workers in Auckland who cross the boundary in and out of Auckland.
Bloomfield said the additional testing requirements might be inconvenient and unwelcome, but they were needed to try to ensure Auckland could move down the alert levels more quickly.
Those workers would have until 11.59pm on Thursday to get their first tests done, Ardern said.
Those measures gave extra confidence to change alert levels outside Auckland.
Ardern said the change was difficult for Northland, which would be cut off from the rest of the country. But those who needed to pass through Auckland to get elsewhere would be able to.
Northlanders transiting through Auckland would be asked to bring evidence of where they're going, and to move through without stopping.
Case numbers 'reassuring' - Bloomfield
It comes as 20 new cases of Covid-19 were reported in the community today - all in Auckland.
The total number of cases in the community is 821.
Five cases from today are yet to be epidemiologically linked to the outbreak. Bloomfield said numbers were moving in the right direction, "which is reassuring".
Bloomfield said three days of 20 daily cases was a "remarkable coincidence", but a higher proportion of those cases were down to household contacts.
Only one of yesterday's cases was an essential worker, he said.
Just five of yesterday's 20 cases have been infectious in the community. The rest were in isolation throughout the period they were infected.
Eighty-six per cent of all contacts of cases have been called by contact tracers, the Ministry of Health said. Ninety-one per cent have received at least one test result.
Bloomfield said the total cases unlinked to existing cases as at this morning was 33. Ardern said she has asked officials to date-stamp the 33 mystery cases, and she might have more information to share tomorrow.
There are 40 Covid patients in hospital, and six are in ICU or a high dependency unit.
The lowest number of test swabs were taken since the start of the outbreak yesterday - 4750 in total and just over 2000 in Auckland, Bloomfield said.
He said that was partly because other illnesses were not spreading - but high testing was essential and anyone with symptoms should get tested.
Ardern said a lot of work has gone into the Crowne Plaza MIQ facility, including looking at the ventilation, and any residual risk has been minimised as much as possible.
Middlemore Hospital exposure fears
It comes as reports emerge that patients in Auckland's Middlemore Hospital could have been exposed to the virus.
The son of a 91-year-old man who was in the same ward in Middlemore Hospital where a person tested positive for Covid-19 told the Herald he was distressed and seeking answers on "how things went so horribly wrong".
The two patients in the ward are expected to be tested today.
Bloomfield said the infected Middlemore Hospital patient was yet to be linked to any other cases, though everyone in their 10-person household was being interviewed.
He said he was confident there would be a link.
The case presented at the ED with symptoms that were not Covid symptoms, and was then admitted to the "appropriate place", Bloomfield said.
The person would have "ideally" been isolated from other patients on the ward the following day, when the person was suspected of having Covid-19.
Bloomfield said why that wasn't done was being looked at, and he understood the frustrations of the other patients and their families.
He didn't know whether the health staff who dealt with the case were wearing N95 masks.
Ardern said the Counter Terrorism Legislation Bill would be passed before the end of the month, and the public has already had a say at the select committee process.
Reviews of the IPCA and Coroner would also look into the terrorist's case, and whether he received rehabilitation support.
Asked whether any de-radicalisation had been attempted, Ardern said there were attempts to engage with Ahamed Aathil Mohamed Samsudeen, but he had been reluctant.
Protected person status made deportation "very difficult".
Ardern said she has asked officials to look into what could be done with Samsudeen's case, given he acted fraudulently to gain refugee status and was a national security threat.
David Seymour vaccine controversy
Ardern said Act leader David Seymour had experienced an online backlash today for "good reason".
Earlier today, Seymour was accused of sabotaging the vaccine rollout by publicly sharing a code allowing Māori to get prioritised bookings.
Ardern said vaccination centres send out targeted messages for their clients all the time, so for Seymour to "try and undermine that for all the wrong reasons is hugely disappointing".
Air NZ changes
Air New Zealand is making changes to its domestic network between Wednesday, September 8 and Tuesday, September 14 in response to the recent alert level changes around the country.
Air New Zealand chief customer and sales officer Leanne Geraghty said while the airline is well versed at navigating the various alert level changes, it may take a couple of days for some offerings to return to normal.
"Our customers can expect to see our lounges in Wellington, Christchurch, and the regions reopen; and valet services resume in Christchurch.
"While the country has been under alert level 3 and 4 for the past few weeks, it may take a few days to return to our full lounge service offering, but we'll be working with suppliers to ensure this is as seamless as possible.
"In line with the Government's announcement, Wellington, Christchurch and regional lounges will be operating with a capacity limit."
Food and beverage services onboard remained suspended.
For those in Auckland, or wishing not to travel, the company had extended its Covid-19 flexibility policy for domestic travel to October 31, 2021. That meant customers could place their booking in credit.
Air NZ customers would be required to wear masks within airports, lounges and on all flights.
Alert level change 'justifiable' - expert
Otago University epidemiologist Professor Nick Wilson said the alert level step-down for most of New Zealand was a "justifiable move" from a public health and social perspective.
But he said the Government could have gone further by keeping "high-risk" venues like bars, nightclubs, churches and gyms closed - while also rolling out more comprehensive indoor mask requirements at the level.
"This not only requires high levels of testing in the community of anyone with symptoms – but also an expansion of wastewater testing so that suburbs testing positive can be identified and testing boosted at such localities."
He added that indoor ventilation urgently needed improvement across the city, while vaccination stations could be made more accessible.