The action from Mayor Lori Lightfoot comes days after a warning about surging COVID-19 cases in the city, with the average number of daily cases approaching 700.
As part of the new rules, bars without food licenses again cannot have indoor service. All liquor sales at all establishments must end at 9 p.m.
Non-essential businesses must close from 10 p.m. until 6 a.m. Essential businesses, such as grocery stores, pharmacies and take-out restaurants, will be allowed to operate.
WATCH: Mayor announces non-essential business curfew, restrictions
Mayor Lightfoot said all Chicagoans should refrain from gatherings of more than six people or any social gatherings after 10 p.m.
"If we need to take further steps and move back to Phase 3 or even go back to shelter in place, I'm not going to hesitate to do that," Lightfoot said.
"I don't want to put more restrictions in our city," Lightfoot added. "No one does, but I have to do what is right to save lives and if that means rolling back further, I will."
The move is frustrating for some bar and restaurant owners, considering that earlier this week officials said dining out has not caused the latest spike in COVID-19 cases.
Nick Kontalonis, owner of Marquee Lounge - one of Chicago's oldest taverns - has grown numb to 2020.
"You seem to get used to it after a while. This is our third rodeo," he said.
With no food license, Kontalonis shut down bar service at the Lincoln Park mainstay last night for the third time this year.
"I guess we just have to do what's best for society and let the numbers come down," he mused. "It's the only thing we can do."
Places like Marquee Lounge or Rossi's in River North, old haunts that don't serve food and have no outdoor space options, have been disproportionately affected by the mitigation rules for Chicago to stop the spread of COVID-19.
"I'm losing a lot of money, but I also think that the mayor and governor are trying to do the right thing," said Dennis McCarthy, owner of Rossi's. "How can I get mad? I'm more worried about my employees getting sick."
Rossi's had been open four weeks, and tried to do their own contact tracing during that time.
"We have people coming in from out of town that come from Texas, Florida and they don't want to wear masks, don't want to sign in, they don't want to follow the rules," McCarthy said.
Melvin Brooks, the owner of President's Lounge in Chatham, said a broader shutdown would be fairer than the back-and-forth bar owners have endured.
"My 25 customers, we alone cannot save, we cannot turn the bend on this virus," Brooks said.
Brooks says the city license he paid $4,400 for arrived in the mail Thursday. An official with Chicago's Department of Business Affairs and Consumer Protection declined to say if the city would consider a refund of those fees.
For places that can stay open, bar service must end at 9 p.m. and a 10 p.m. curfew has cut off late night sales.
"This business is such a slim margin business that every hour to add revenue to top line sales is an opportunity to flow to bottom line," said John Aldape of The Fifty/50 Restaurant Group. "We really think it's going to take away our ability to be profitable. And that's already been hard."
Chicago Department of Public Health Commissioner Dr. Allison Arwady said often people will say they were in contact with people at a social gathering that may have been at a bar. Through contact tracing, the city does not have an exact percentage on transmission at bars and restaurants.
"We do not always know causation when we are doing case investigations and contact tracing," Dr. Arwady said. "What we do is, when we have a case, we ask 'Who have you been in contact with?'"
Dr. Arwady said large and small gatherings are "posing significant health risks."
WATCH: Dr. Allison Arwady speaks about Chicago COVID-19 cases
"There is a 30% chance that someone in a group of 25 people has COVID-19. There is a 50% chance that someone in a group of 50 has COVID-19. Even getting together 10 people in Chicago, there is a 14% chance that someone has COVID-19."
All other restrictions, including indoor capacity limits of 40% or 50 people within a room or space, remain in place.