Community transmission of the highly infectious variant has been recorded for the first time in New Zealand, with nine members of a Nelson family testing positive following a trip to an Auckland wedding.
There will be no lockdown, but the new cases mean New Zealand, which has kept the virus at bay for much of the pandemic, will heighten other restrictions to minimise cases.
"Our strategy is to slow the spread of Omicron down," the prime minister said at an unscheduled press conference on Sunday morning.
As of midnight on Sunday, New Zealand will shift from the "orange" setting to "red" on its traffic light-themed COVID-19 restrictions system.
At red, additional mask use is required and hospitality venues must cap indoor patrons at 100 and seat them all, with the same cap applied to events and gatherings in a bid to stop super spreader events.
The abandonment of lockdowns as a strategy has been described by some experts as New Zealand ditching its long-held strategies of elimination and suppression in favour of something closer to mitigation.
Ms Ardern calls it a strategy to "minimise and protect".
"Omicron is circulating in Auckland and possibly the Nelson Marlborough region, if not elsewhere," she said.
"Our plan for managing Omicron cases in the early stage remains the same as Delta where we will rapidly test, contact trace and isolate cases and contacts in order to slow the spread.
"We currently have significant capacity in our system to attempt to stamp out outbreaks and our teams are already hard at work to contain this one.
"But as we have seen elsewhere in the world Omicron is significantly more infectious and in due course we know we will see far more cases than we have in the two years of the pandemic to date."
New Zealand has recorded just 52 COVID-19 deaths through the pandemic, with a daily case high of 222, recorded on November 16 last year.
Ms Ardern said case numbers were likely to hit 1000 or more within a fortnight, and cases would be "in the thousands" in a few weeks' time.
She said New Zealand's high vaccination rates - with 93 per cent of the population aged 12 and over double dosed, and a growing number with booster shots - would lessen the severity for most who catch COVID-19.
"I know those sorts of case numbers will sound deeply concerning for people to hear," she said, addressing anxious New Zealanders who have been sheltered from the pandemic.
"But it's important to remember that COVID is a different foe to what it was in the beginning.
"We are not used to having it amongst us, and we still want to prevent people from getting it. But if you do, because of vaccinations for most people it will be a mild to moderate illness that you can manage at home."
Director-General of Health Ashley Bloomfield said officials had yet to determine the outbreak's index case, but had picked up another positive case from the Auckland wedding.
An Air New Zealand crew member who worked on the same flight that took the Nelson family home from Auckland has also tested positive, and has worked on four further flights while infectious.
Ms Ardern called on Kiwis to be kind, to get vaccinated, and to get their booster shot when eligible.
"We have spent the last two years preparing for this and today I'm grateful of the position New Zealanders have put us in to fight Omicron," she said.
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