Mr Barr said the dangerous conditions could place a number of suburbs at risk.
"The combination of extreme heat, wind, and a dry landscape will place suburbs in Canberra's south at risk," Mr Barr said.
"This fire may become very unpredictable. It may become uncontrollable. So given the best advice available to me, I have just made a decision to declare a Territory-wide state of alert for the Australian Capital Territory.
"This is effective now and will be in place for as long as Canberra is at risk."
This is the first state of emergency that has been declared since the 2003 bushfires tore through Canberra.
ACT Emergency Services Commissioner Georgeina Whelan said over the next 72 hours people in the area may be subject to road closures, evacuations and any other actions required to keep people safe.
"We are concerned the conditions in the ACT will be the worst we have seen since 2003," she said.
"The fire activity is increasing. It has been unpredictable. It remains challenging. It is difficult to access. This fire could create its own weather system.
"If all of what I have just outlined occurs, there is a chance this fire could break containment lines."
The 2003 Canberra fires killed four people and destroyed more than 500 homes.
Multiple fire bans have been issued to parts of New South Wales, Victoria and Tasmania as "oppressive humidity" and an extreme heatwave engulf parts of southern Australia.
It isn't just Canberra that will be experiencing dangerous heatwave conditions today, with elevated fire dangers, "oppressive humidity" and a "very sweaty, uncomfortable night" forecast for NSW, Victoria and Tasmania, thanks to the Northern Territory's moisture being on a crash course with the south.
In NSW, where the mercury is set to hit 45C in parts of Sydney's west, a total fire ban has been issued for the Southern Slopes, Southern Ranges and Monaro Alpine areas.
The Rural Fire Service have warned people to know what to do if they're threatened by fire today, due to widespread "very high" fire danger and extreme temperatures.
RFS deputy commissioner Rob Rogers said firefighters remained concerned about blazes on the south coast and the NSW-Victoria border. Fires charring the ACT this week are also likely to jump the border to NSW.
"In this drought, these fires are just moving so quickly because the landscape is so dry and these winds are pushing them along at unbelievable speed," he told the Nine Network.
Temperatures are expected to exceed 40C in Victoria today, including a forecast top of 43C in Melbourne, and the heat is expected to worsen fire conditions.
"Friday is a very significant day for us with elevated fire conditions," Victoria emergency management commissioner Andrew Crisp said.
"There'll be storms that come through with the potential for dry lightning, so again it's a challenging day for us."
Severe fire danger has been forecast in the Mallee, Wimmera, Northern Country, North Central, South West and Central districts.
A total fire ban is in place for all state regions except Gippsland and the northeast.
Emergency Services Minister Lisa Neville said current blazes are expected to become more active and there is a high risk of new fires starting.
"The west of the state, where we haven't had fires, it is incredible dry … and the risk of new starts will be significant," she said on Thursday.
Rain expected to sweep through the state by Saturday and Sunday will not be spread evenly, according to the Bureau of Meteorology, so will be of little help to firefighters.
Very high fire danger has been declared in the ACT, and in WA, severe fire danger is forecast for the West Pilbara Coast.
In Tasmania – where Hobart could see temperatures of 40C today – severe fire danger has been forecast for the East Coast, Midlands, Upper Derwent Valley, South East and Central Plateau.
And in South Australia, severe bushfire conditions were declared for six districts yesterday: the Lower Eyre Peninsula, the mid-north, the Mount Lofty Fanges, Yorke Peninsula, the lower southeast and on Kangaroo Island.
