Hong Kong Chief Executive Carrie Lam said the government would invoke emergency powers to "end violence and restore order" in the special administrative region which has been reeling from months of violent protests.
Lam said the decision to invoke the emergency powers was "a difficult but also a necessary one for public interest".
Under the new emergency regulation, the government said they would ban face masks starting on Saturday.
The emergency law was first introduced in 1922 while Hong Kong was a British colony. It was last invoked in 1967 and allows for arrests, censorship, controlling movement, appropriation of property among other powers.
Speaking at a news conference, Lam said: "Protests arising from the fugitive offenders bill have continued for nearly four months now. Over this period, protesters' violence has been escalating and has reached a very alarming level in the past few days, causing numerous injuries, and leaving Hong Kong to a chaotic and panicked situation."
Shot then arrested
On Tuesday, police shot an 18-year-old with a live round on China's 70th anniversary during violent protests where police fired tear gas, rubber bullets, and six live rounds, according to Reuters.
The Hong Kong police had defended the incident stating that a " large group of rioters" had attacked police officers and that the officers' "lives were under serious threat".
"To save his own life and his colleagues' lives, he fired a live shot at the assailant," a police spokeswoman said.
The student who was shot was later charged for rioting and assaulting an officer. He could serve a 10-year sentence, Reuters reported.
The anti-mask law prompted new protests in the city, youth pro-democracy party Demosisto wrote on Twitter.
'Tensions must be reduced'
UK foreign secretary Dominic Raab reacted to the emergency declaration, stating: "Political dialogue is the only way to resolve the situation in Hong Kong. While governments need to ensure the security and safety of their people, they must avoid aggravating and instead reduce tensions."
A UN human rights office spokeswoman said on Friday that new government policies to deal with protesters should protect the right to the freedom of assembly.
Protests have gone on in Hong Kong for several months. They were originally sparked by opposition to legislation bill that would have allowed residents to be extradited to mainland China but has turned into a larger pro-democracy movement.