"After a day of difficult discussions, we have taken a decision: all those coming to Israel from abroad will be placed in isolation for 14 days," Netanyahu said in a video broadcast on his Twitter account.
"This is a difficult decision but it is essential to maintaining public health, which takes precedence over everything," he added, according to a statement.
He noted that the measure would be implemented for two weeks and promised steps to support the Israeli economy.
Israel had already imposed major restrictions on travellers arriving from several countries.
On Wednesday, the Jewish state had barred entry to almost all non-residents arriving from France, Germany, Spain, Austria and Switzerland, declaring that arrivals from those nations could only enter if they could prove they had a place to stay in quarantine.
Those measures had come on top of restrictions previously imposed on arrivals from mainland China, Hong Kong, Thailand, Singapore, Macau, South Korea, Japan and Italy.
But restrictions had not until now extended to travellers from the United States, which last year contributed nearly 890,000 tourist arrivals to Israel -- more than double that of France, in second place.
Israel has so far recorded 50 cases of the illness.
The Palestinian Authority, which on Thursday declared a 30-day state of emergency in parts of the West Bank it administers, has reported 25 cases.
The latest measures come a month ahead of the Passover festival, which usually sees tens of thousands of Jews head to Israel to celebrate.
Since the novel coronavirus first emerged in late December, 113,255 cases have been recorded in 101 countries and territories, killing 3,964 people, according to an AFP toll based on official sources on Monday around 1700 GMT.
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