The measures have been introduced in a bid to help control the spread of the Omicron variant, it stated.
The Welsh Government is also advising the public to get vaccinated, take lateral flow tests before going out, meeting other households outdoors or a well-ventilated place indoors, space out socialising alongside social distancing, wearing a face coverings and washing their hands.
It also announced that up to £60m will be available to support businesses impacted by these new restrictions.
First Minister Mark Drakeford said a plan was needed to stay safe this Christmas and stronger measures to protect everyone afterwards as the country prepares for a “large wave of Omicron infections”.
He added: “This year, a smaller Christmas is a safer Christmas. The fewer people we see, the less changes we have of catching or passing on the virus.
“Please enjoy Christmas with your nearest and dearest – and think about meeting up with wider circles of friends when the threat posed by the Omicron variant has passed over.
“I also want to thank the many thousands of people who will be working this Christmas to keep us safe – especially all those who have cancelled their plans to work in the vaccination centres across Wales to increase our protection against this awful virus.”
The Night-Time Industries Association (NTIA) responded to the announcement, stating the industry would look at legal options.
NTIA boss Michael Kill said: “We are astounded at the actions of the Welsh Government, the consistent targeting of the nightclub and late-night economy has gone too far.
“It is very clear the Welsh Government has purposefully placed restrictions on an industry with no supporting evidence.
“Nightclubs and the late-night economy have been at the sharpest end of the pandemic and have upheld the public health strategy with Wales for more than two years, with closures and mounting debts.
“We have been placed in an untenable position and will now have no choice but to come out fighting. The sector will be considering its legal options following the announcement.”