Meeting in crisis session under the chairmanship of President Jacques Chirac, the cabinet invoked a 50-year-old law originally drawn up at the start of the Algerian war which permits the declaration of curfews, house searches and a ban on public meetings.
The measure was to come into effect at midnight (2300 GMT) after the government issued a decree setting out the geographical limits for the state of emergency.
The first place to enact the new powers was the northern town of Amiens, which declared an overnight curfew for unaccompanied under 16-year-olds as well as a ban on the sale of petrol to minors.
In remarks conveyed by his spokesman, Mr Chirac said he had decided to "give the forces of law and order supplementary means in order to assure the protection of our fellow citizens and their property... It is necessary to hasten a return to calm."
Tough response
It was the toughest response to date to nearly two weeks of rioting in the country's high-immigration suburbs which has left more than 6,000 cars burned, public and private property destroyed, tens of policemen injured and one civilian death.
More than 1,500 people, mainly Arab and black youngsters, have been detained.
The crisis is the worst to hit France for decades, and has thrown into stark relief the failure of its policies, based on the theory of republican equality, for integrating millions of immigrants and their children from its former African colonies.
Acknowledging the accumulation of social and economic handicaps in the Arab community, Prime Minister Dominique de Villepin also announced a series of new measures designed to facilitate access to the jobs market and stamp out racial discrimination.
"Our collective responsibility is to make difficult areas the same sort of territory as others in the republic," Mr Villepin told the National Assembly.
Among the steps are the creation of an anti-discrimination agency, the allocation of 20,000 state-paid jobs for inhabitants of poor suburbs, an extra 100 million euros (US$120 million) for associations working there, and the creation of 15 new special economic zones with tax-breaks for employers.
Unrest continues
Monday night showed no let-up to the unrest, with 1,200 cars torched and 300 arrests, but the focus switched away from the capital to regional towns and cities, notably Toulouse in the southwest where a youth had his hand blown off when he picked up a tear-gas grenade.
In eastern France, schools, a library, a church and several vehicles, including five buses, were incinerated, and a German TV crew was pelted with rocks.
In Auxerre, southeast of the French capital, 15 people were hospitalised with breathing problems after a blaze in a cellar forced them to evacuate a building.
In the central city of Saint-Etienne a four-storey apartment block was evacuated when flames from burning vehicles spread.
However the chief of the national police service Michel Gaudin said there were signs the violence was fading, "allowing us to see a glimmer of light."
The 1955 emergency powers law was enacted at the start of disturbances in then French-controlled Algeria that triggered the six year war of independence.
It permits state-appointed governors -- or prefects - to "forbid the movement of people and vehicles in places and times fixed by decree" and ban "meetings likely to provoke or fuel disorder".
The law also allows the authorities to "order house searches at any time of day or night" and to control "press and publications of all kinds" although Mr Villepin told parliament this last article would not be invoked.
Article six allows the interior minister to issue house arrests for people "whose activity is dangerous for public safety."
Move criticised
There was strong criticism of the government for resorting to an emergency measure that recalls one of the worst moments in the country's modern history and has particularly painful associations for Algerians, who were the original law's main targets.
The left-leaning Le Monde newspaper said that "exhuming a 1955 law sends to the youth of the suburbs a message of astonishing brutality: that after 50 years France intends to treat them exactly as it did their grandparents."
"I did not think they would dare to do it. It is really a provocation for those of us who lived through the humiliations, the torture, the round-ups during the war of liberation," said Abdelhakim Bouziane, 79, an Algerian living in the town of Mantes-la-Jolie west of Paris.
Youths in one northern Paris suburb also poured scorn on the curfew.
"I have been staying up till six in the morning and I am not going to change. If the cops look for us, they'll find us," said Hamid, an 18-year-old in La Courneuve.
The violence was sparked by the accidental deaths of two teenagers on October 27 who were electrocuted in a sub-station where they had hidden from police.
After several days of rioting outside Paris, the violence spread to the rest of the country over the last days.
The protesters say rioting is the only way they have to express their frustration at a life of misery, joblessness and discrimination.
Bloggers investigated
Meanwhile two teenage boys are under investigation for inciting violence by using their blogs to urge others to join the rioting that is raging in the country, judicial officials said.
The two, a French national aged 16 and an 18-year-old Ghanaian national come from the Seine-Saint-Denis region northeast of Paris where the violence first broke out on October 27.
They have been placed under judicial investigation, the first step to formal charges, for "provoking wilful damage to property that poses a danger to people, via the Internet."
Both have been released from custody but remain under court supervision.
A third youth, aged 14, from the southeastern city of Aix-en-Provence, has been released without charge for procedural reasons.
All three youths, who did not know one another, had hosted their blogs on a site owned by a youth radio station, Skyrock.
UN refugee commissioner
The UN High Commissioner for Refugees (UNHCR), Antonio Guterres, said that the urban unrest in France is the latest example of mounting intolerance being witnessed around the world.
The UN high commissioner also denounced what he described as the politics of fear practiced by some politicians, which he said had also contributed to the disturbances in scores of French cities.
"What occurred in Paris is an example of a more general problem, one of intolerance ... which is often amplified by objective factors, economics, society, unemployment, situations of poverty and exclusion," Mr Guterres told a group of reporters during a visit to Brazil.
"We are confronting a pyschological climate on a global scale that is threatening the protection of refugees," the UN commissioner said.
Mr Guterres said "intolerant sentiments" around the world were threatening "the social cohesion of societies and world peace".
"Fear is being used as a weapon to win votes ... The risk is that public opinion will be totally contaminated by this irrationality, it will cause a desperate attitude, this is extremely grave," Mr Guterres said.
"It's a global problem that exists all around the world, in the north, the south, all over, the use of fear, of racial hatred," he said.