All people except Covid-prevention volunteers and essential workers "must not leave their residences except to receive Covid tests and emergency medical treatment", officials from central China's Zhengzhou Airport Economy Zone said.
The move comes after images emerged on Chinese social media last week showing people breaking out of the facility, which is run by Taiwanese tech giant Foxconn and makes products for Apple.
Employees complained online of poor conditions, a lack of supplies and having to flee the factory on foot to avoid Covid transport curbs. Foxconn says there are currently more than 200,000 workers at its Zhengzhou plant.
"Being paid is not important anymore, the most important thing is to survive," one 30-year-old man working at Foxconn told AFP, saying he was staying at the factory because he was afraid of adding to an outbreak in his hometown.
"The anti-virus measures on campus are shambolic, virus-negative people are living together with virus-positive people," said the worker, who asked to remain anonymous.
He said the food provided to employees was "not filling", and complained of a lack of medicine for sick colleagues.
China is the last major economy committed to a zero-Covid strategy, persisting with snap lockdowns, mass testing and lengthy quarantines in a bid to stamp out emerging outbreaks.
But new variants have tested local officials' ability to snuff out flare-ups faster than they can spread, causing much of the country to live under an ever-changing mosaic of Covid curbs.
The district in Zhengzhou city said Wednesday that all businesses would be required to work from home, with only "key enterprises" allowed to continue operating. It did not specify which businesses fell under that category.
Only medical vehicles and those delivering essentials are allowed on the streets.
The district's more than 600,000 residents will have to take nucleic acid tests every day, the local government said, warning that it would "resolutely crack down on all kinds of violations".
The Communist Party-run Dahe Daily said on Wednesday local authorities would "thoroughly disinfect" Foxconn's facilities, including employee dormitories, over the next three days. Workers quarantining at the factory would need to show seven days of negative tests before leaving for their hometowns.
The paper also said the government had promised to provide timely meals and to set up a counselling hotline for workers.
Foxconn told AFP on Wednesday its Zhengzhou park "maintains closed-loop operation", without providing details.
The company said at the weekend it was testing employees daily and offering transport to those who wanted to leave, after the videos on social media showed employees walking down motorways with their suitcases.
Footage shared with AFP by a Foxconn employee showed a large group of workers pushing their suitcases down an empty road on Tuesday afternoon, towards a line of people in hazmat suits.
The Zhengzhou factory accounts for around 80 percent of iPhone 14 production, senior analyst Ivan Lam at Counterpoint Research told AFP.
Apple did not immediately respond to an AFP request for comment.
Local governments in the area surrounding Zhengzhou city have asked Foxconn workers to register with authorities if they return home and to complete several days of quarantine upon arrival.
The company also said on Tuesday it would quadruple bonuses for employees willing to remain at the factory during the outbreak.
Chinese social media users accused Zhengzhou authorities on Wednesday of "performatively" lifting Covid restrictions after the city announced a day earlier it would "restore normal production and life".
"In the morning you lift the lockdown, then at night you lock down again, what are you trying to do?" Weibo user Taodixing asked.
China reported more than 2,000 fresh domestic infections on Wednesday for the third day in a row.
Henan province, where Zhengzhou is located, officially reported 359 Covid-19 infections on Wednesday, a jump from Tuesday's 104.
The southern Chinese manufacturing hub of Guangzhou also announced partial lockdowns in several districts this week in response to rising case numbers.
According to analysts Capital Economics, the number of people in quarantine in China is at its highest level since the Shanghai lockdown in spring, with outbreaks in more than 50 cities.