The curfew in Lod, an Arab-Jewish city east of Tel Aviv, comes a day after Prime Minister Benjamin Netanyahu announced a special state of emergency in the wake of continued violent riots, reports Xinhua news agency.
"A strategic decision" was made that people will have to stay at home between 8 p.m. and 4 a.m., police spokesman Micky Rosenfeld said in a statement on Wednesday.
Under the curfew, residents will have to stay in their homes, except for seeking medical care or shelter during rocket attacks amid the current fighting between Israel and militant groups in the Gaza Strip.
The maximum penalty for violating the curfew is three years in prison.
Mayor of Lod Yair Revivo issued a statement, urging residents to stay indoors to "achieve calm and start the process of restoring order in the city".
Clashes have also erupted in other cities where Jews and Arabs live alongside, such as the Acre and Ramleh.
Earlier in the day, Netanyahu attended a police situation assessment in Acre.
He said in a statement that Israel is "in a fight on several fronts", referring to fighting against Gaza's ruler Hamas and the riots in Israeli cities.
He denounced the violence as "anarchy", saying it is "intolerable".
On Tuesday night, Netanyahu and Defence Minister Benny Gantz ordered paramilitary Border Police units be brought from the Israeli-occupied West Bank to Lod, Acre and other places.
On Tuesday, a funeral of an Arab man who was shot dead by a Jewish gunman turned into clashes between thousands of Arabs and police forces.
Synagogues, a mosque, shops and dozens of cars were torched, according to reports of Israel's state-owned Kan TV news.