Jacinda Ardern said the new arrivals will need to go into either quarantine or "managed isolation" at an approved facility for a minimum of 14 days.
"Our borders are our biggest risk," she said.
She said even one person slipping through the cracks and bringing the virus in could see an explosion of cases.
Ardern said everyone arriving will go into a managed facility that is provided by the government."
She said the tighter controls could not have been done in the beginning but "we can and are now".
"Nearly 40,000 New Zealanders have returned home since the 20th March ... that is more than all of the hotel rooms across the country that we could have properly housed people in."
Up to 18 hotels will be used to implement the new measures and one to two of those will be specifically for those set aside under strict quarantine measures, those with symptoms or those who are being tested for the coronavirus.
Ardern clarified that the people who arrive without symptoms and who go into assisted self-isolation will be able to walk outside and get fresh air.
Bloomfield added that they are not quarantined to their rooms.
But those that are will be looked after so they are not putting others at risk, Director-General of Health Dr Ashley Bloomfield said.
Ardern has not ruled out using co-payments in the near future for the government-provided accommodation.
Academics and opposition MPs have been demanding action, saying tougher border controls are necessary to stop the spread of Covid-19.
Earlier today, Foreign Affairs Minister Winston Peters said police and military guards could be used to monitor people returning from overseas under the new rules.
Peters told Morning Report travellers would be met at the airport and taken straight to a quarantine facility.
He said phone apps and other surveillance equipment were also being considered to ensure people stayed where they were supposed to be.
Last week National Party leader Simon Bridges said New Zealand needed an "enforced quarantine" for those entering the country.
He said effective quarantining had been the foundation of other countries' successful responses.
Foreign arrivals are already barred, meaning those quarantined will be residents and citizens returning from abroad.