All non-essential shops and services, including restaurants, hairdressers, museums and gyms will be closed from Sunday until Jan. 14. All schools will be shut until at least Jan. 9.
"The Netherlands is again shutting down. That is unavoidable because of the fifth wave that is coming at us with the Omicron variant," Rutte told a televised news conference.
Other measures include a recommendation that households receive no more than two visitors and that gatherings outside are also limited to a maximum of two people.
A failure to act now would likely lead to "an unmanageable situation in hospitals," which have already scaled back regular care to make space for COVID-19 patients, Rutte said.
Infections in the Netherlands have dropped from record levels in recent weeks after the introduction of a nighttime lockdown late last month. The Omicron variant arrived as the country was already battling a wave in coronavirus infections.
Cases of the variant have surged since it was first found in the Netherlands three weeks ago, while hospitals are struggling with the large numbers of COVID-19 patients in their wards, near the highest levels this year.
Omicron is expected to become the most dominant variant of the virus in the Netherlands between Christmas and New Year's Eve, leading Dutch infectious disease expert Jaap van Dissel said.
While more than 85% of the Dutch adult population is vaccinated, fewer than 9% of adults have had a booster shot, one of the lowest rates in Europe.
On Saturday the National Institute for Public Health (RIVM) reported a total of over 2.9 million COVID-19 cases since the start of the pandemic, with 20,420 reported deaths. There were 14,616 new infections reported in 24 hours.