Victorian Premier Daniel Andrews acknowledged the "mixed news" for regional Victoria.
"It's great news for Shepparton, not so great for the people of Ballarat," he told reporters in Melbourne.
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"If we allow it to get away in one part of regional Victoria, it becomes a threat and a risk to all of regional Victoria. We simply can't have that happen.
"Shepparton shows you that a community can be locked down, can stick together, can be supported and deliver fundamental control of an outbreak."
Ballarat residents will have to abide by stay-at-home orders with only five reasons to leave home, visitors at homes will be banned and a five-kilometre travel limit will apply.
It comes after Victoria recorded 423 new coronavirus cases and two deaths on Wednesday, as the number of total active infections climbed above 4000.
Five cases were in regional areas of Ballarat and Geelong.
Of the new cases, 149 are linked to known outbreaks and the source of the remaining 274 is under investigation.
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Two deaths were also reported, a man in his 40s from Whittlesea and another man in his 70s from Wyndham, bringing the toll from the current outbreak to eight.
It is not yet known if one of the deaths is a 46-year-old man who worked at a Serco call centre in Mill Park.
Martin Blight became infected with COVID-19 after a workplace outbreak died in hospital on Monday, according to the Australian Services Union.
The union remembered Mr Blight as "a committed ASU member, a father, a friend to many" and said his family encourages everyone to get vaccinated "as soon as possible".
It's unclear whether he was vaccinated but he had a Pfizer vaccine booked in for September, according to his Facebook.
It comes as Victorians may be given more freedoms from Friday, with an extra hour of exercise and an expanded travel limit on the table once 70 per cent of those eligible have received their first COVID-19 dose.
Mr Andrews has confirmed the state's roadmap out of lockdown will be released on Sunday.
The roadmap, outlining restrictions through to November, will rely on Burnet Institute modelling of vaccination and hospitalisation rates.
However, Opposition Leader Matthew Guy has criticised the government for "stringing the community along for another week".
He called for an immediate end to the 9pm to 5am curfew, family outdoor gatherings and the return of Year 11 and 12 students for the start of term four.
In the 24 hours to Wednesday morning, 54,649 tests were processed and 41,856 Victorians received a vaccine dose at a state-run hub, with the number of active cases in the state now 4,038.
Victoria has recorded 423 new local COVID-19 cases and two more deaths - SBS News
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