The state's Prime Minister Armin Laschet announced that the entire district of Guetersloh -- home to more than 360,000 people -- would be locked down for the next seven days.
Laschet said the new lockdown would mirror the measures imposed on a national level earlier in the Covid-19 pandemic.
Group meetings have been banned, and schools, daycare centers, museums, restaurants, pubs, swimming pools, gyms and other public places forced to close or drastically limit the number of people allowed in at any one time.
Meetings between members of different households have been limited to two people at a time. Shops will remain open, but only with strict hygiene measures in place.
Laschet said the new measures were necessary because 1,553 workers at the Toennies meat processing factory have tested positive for the virus in recent days.
The plant has been shut since last week. All of its 7,000 local employees and their families have been ordered into lockdown, even if they have not tested positive for the virus.
On Tuesday, those restrictions were broadened to cover the entire district. "You must stay in quarantine," Laschet said during a news conference on Tuesday, adding that police will enforce the lockdown if necessary.
He said that while the outbreak has so far been limited to the factory, public health officials don't know how many people could have come into contact with someone who had been infected in the past few days.
Local public health officials are now racing to contain the outbreak through a large-scale test and trace program.
Everyone working at the factory has already been tested, according to the district's website. Laschet said 100 mobile testing teams were combing through the district to identify anyone who may have been infected.
North-Rhine Westphalia is Germany's most populous state, with almost 18 million inhabitants.
In the seven days to Monday, the entire state reported 1,860 new cases of the novel coronavirus. That statistic suggests that while the outbreak has been severe, it has so far been largely confined to the factory and its workers.
Laschet said Tuesday that only 24 coronavirus cases have been identified outside the factory so far.
The lockdown Guetersloh marks the first time Germany has imposed a new lockdown, after easing many restrictions last month.
Germany has so far recorded 192,127 cases and 8,909 deaths related to the novel coronavirus -- rates that are relatively low in compared to other European countries.
The government has been credited with acting early in the pandemic and scaling up the country's testing capacity. German hospitals have even been able to accept patients from other, more embattled, European countries.