The new system comes into force from 6am Monday 2 November, when the present temporary restrictions on hospitality will be eased.
Sturgeon said she could not rule out closing pubs and bars "in the next few weeks", which would take place under level four.
Trade bodies said the system was devastating for pub operators, given the tight restrictions on selling alcohol in place across most of the country.
Sturgeon outlined which areas would face which measures.
Level one: Highland, Orkney, Shetland, Moray, Western Isles
Level two: Aberdeenshire, Aberdeen, Fife, Dumfries and Galloway, Perth and Kinross, Angus, the Borders, Argyll and Bute.
Level three: Inverclyde, East Dunbartonshire, West Dunbartonshire, Renfrewshire, East Renfrewshire, Glasgow, South Ayrshire, East Ayrshire, North Ayrshire, Stirling, Edinburgh, Midlothian, West Lothian, East Lothian, North Lanarkshire, South Lanarkshire.
Sturgeon said the Government had considered placing both North and South Lanarkshire in level four and it was a "borderline decision" to place it in the lower level.
What will each level mean for pubs?
Level four – under this level, pubs and restaurants would be closed. Schools would remain open but all non-essential shops and many other venues would close. This would be quite similar to the first lockdown in the spring.
Level three – pubs and restaurants would be allowed to open until 6pm to serve food and non-alcoholic drinks. However, pubs could not sell alcohol indoors or outdoors. This level is similar to the type of restrictions already faced by hospitality in most of the central belt.
Level two – pubs can serve alcohol indoors with a main meal until 8pm. This would be similar to the measures imposed on pubs outside the central belt. At the moment, a maximum of six people from two households can meet at hospitality venues and pubs can serve alcohol outdoors until 10pm.
Level one – pubs would be able to open until 10.30pm. Six people from two households could meet indoors but this will not be allowed from 2 November as there is already a nationwide restriction on indoor socialising in homes for the time being.
Level zero – this level would be something close to normality. However, no council will be placed into this level when the system begins next month, the Scottish Government has said as it is not yet safe enough. It would allow a maximum of eight people from three different households to meet up indoors
The First Minister said it was not yet safe to place any areas into level zero, the most relaxed set of restrictions.
Couldn't get any worse
Paul Waterson, media spokesman for the Scottish Licensed Trade Association (SLTA), said: “The situation couldn’t get any worse and we are fielding calls from members who simply can’t take any more of this. They are deeply worried about the future and this will lead to further confusion and distress.
“It will cause utter devastation and sleepless nights for industry owners, operators and staff who will spend this weekend wondering if their businesses are going to be viable, if they are going to still have jobs and, indeed, if they will even still have a business."
What's more, Stephen Montgomery, spokesperson for the Scottish Hospitality Group, said the new system would “only lead to chaos and failure”.
The group had approached the Government with a “detailed, workable plan for how hospitality could operate safely and viably in each tier”.
Montgomery said the Scottish Government had not taken on any of the group’s recommendations to save jobs.
“This is yet another example of government talking to industry but not listening,” he continued. “Saving jobs is key to protecting people’s livelihoods and the economy. It’s not rocket science - too few hours and too many staff exclude many businesses from claiming the Coronavirus Job Retention Scheme. The Government must acknowledge that the new restrictions will end in hundreds, if not thousands of job losses.
“We still have no data to support the slash of hours which are critical to the viability of a businesses. From Monday, more than 70% of the country’s population will be living indefinitely under tier three restrictions. Allowing restaurants to open for two more hours in this tier would enable them to serve another course and would result in saving 100 jobs for one of our members alone.”