El Hamma, home to some 100,000 people, has recorded 441 cases of infection and five deaths from the Covid-19 illness, mayor Nacef Ennajeh told AFP.
He said a curfew had been imposed from 5 pm to 5 am for one week in the town, located some 325 kilometres (200 miles) south of the capital Tunis.
The North African country has registered a total of 2,543 cases and 63 fatalities since the start of the outbreak.
Trains from Tunis to the city of Gabes, which services El Hamma, have also been cancelled, the national rail company said.
Ennajeh said the town's hospital was struggling to cope. The army set up a field clinic last week to help.
Read also: Tunisian medical researchers are developing technology to remotely detect coronavirus
Almost all coronavirus restrictions were lifted in Tunisia at the start of the summer.
But with the numbers of cases growing since it opened its borders on June 27, the authorities announced this week that international travellers must present a negative coronavirus test on arrival.
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