More than 100 people have been reported killed in sectarian attacks in the past three days.
The new security measures were spelled out by Interior Ministry spokesman Brigadier General Abdel Karim Khalaf.
"We will surround the city with trenches. The entry to the capital will be permitted through 28 roads as against 21 at the moment, but at the same time we will seal off dozens of other minor roads with access to Baghdad."
Another top security official said that the plan is to "monitor who is coming into Baghdad and who is going out. This way we will have a better control of movements, including those of insurgents."
Baghdad has a circumference of 80 km and observers noted that an operation of this scale would take months to complete.
The latest measure comes after insurgents and death squads continue to kill dozens of people daily despite a massive Iraq and US security plan - Operation Together Forward - in place since mid-June.
Pointing a finger at Shiite death squads, Iraq's top Sunni leader Adnan al-Dulaimi said that "well-known militias" were behind the killings that he warned were propelling the country towards "disaster".
US and Iraqi security officials said most of the newly recovered corpses were shot dead execution-style, with bullets to their heads, and many showed signs of torture.
Sunni Arab leaders have regularly charged that the sectarian killings are carried out by militias linked to Shiite political parties who dominate the parliament.
"If strong measures are not taken soon, the country is going towards disaster and no-one would be saved," said Mr Dulaimi, a lawmaker and head of the National Concord Front, Iraq's largest Sunni parliamentary bloc.
"These well-known militias are pushing the country to the edge of catastrophe," he said, referring to armed groups close to radical cleric Moqtada al-Sadr and the Supreme Council for Islamic Revolution in Iraq.
Iraq's Deputy Prime Minister Barham Saleh also said in Washington that militias such as those linked with Sadr were posing a "serious challenge" to Iraq.
"There are discussions with Moqtada al-Sadr and other political leaders in the country that they all have to make a choice."
"Either they are part of the political process and renounce arms and integrate into the country's political system and governing institutions, or that present situation will not be acceptable," he said.
In the past two days, seven US troops have been killed across Iraq, taking the total US military death toll since the March 2003 invasion to 2,677.