The move was expected in Moray, which the First Minister warned on Tuesday was unlikely to move into level two with the rest of the country.
However, a last-minute decision was taken to also hold back Glasgow amid concern over rising cases, especially in the south of the city, and a possible link to the “India” Covid-19 variant.
Ms Sturgeon warned the India variant was “significantly more transmissible” than even the Kent variant that was identified before Christmas.
The decision comes as Boris Johnson warned the India variant could “pose a serious disruption” to plans to ease restrictions in England.
The recommended time between first and second Covid-19 vaccine doses will be cut in the UK from 12 weeks to eight weeks, the Prime Minister announced, in a bid to speed up the programme and combat the threat from the variant.
"The race between our vaccination programme and the virus may be about to get tighter,” he said.
Both Glasgow and Moray will remain in level three for at least a week, with people advised not to travel in or out of either area. A review will be held at the end of next week.
Many locals and business owners were dismayed by the decision, which Ms Sturgeon acknowledged would be “disappointing”.
Affected leisure and hospitality businesses will be given up to £750 per week in support.
Case rates in Glasgow have now overtaken Moray, with 80 cases per 100,000 people in Glasgow compared to 69 in Moray.
Cases are highest in southside areas, including Pollokshields and Govanhill.
There is grounds for “cautious optimism” the situation in Moray is improving, Ms Sturgeon said, as case rates and test positivity are beginning to drop.
However, Ms Sturgeon said she is now even more concerned about rising cases in Glasgow, where the India variant was an “additional and very significant” factor in the decision to continue restrictions.
"We do not yet have a full understanding of the impact of this variant, including on the protection afforded by vaccines,” she said.
"However, I do want to stress that nothing at this stage suggests that it is causing more severe illness.
"However, it is thought that this variant could be significantly more transmissible than even the Kent variant that was identified before Christmas, and that alone calls for an appropriate degree of caution.”
People in the rest of mainland Scotland will be allowed to hug loved ones, meet in other people’s homes and stay overnight from Monday as most of the nation enters level two restrictions.
Pubs and restaurants will be able to serve alcohol indoors, and theatres, cinemas and comedy clubs will be allowed to open.
Most island areas will see even greater easing, entering level one.
Glasgow Chamber of Commerce chief executive Stuart Patrick called for the UK and Scottish governments to review support available for businesses.
"It is deeply disappointing that Glasgow has been affected by a localised spike in Covid-19 cases and cannot move to level two as planned,” he said.
"There will be many businesses that have been planning and incurring costs to move to level two operations and once again they are caught up in developments outside their control.
"We are very keen to see lessons learned quickly about the management of these spikes through testing and vaccination so that lockdowns on such a wide geographical basis do not need to be an ongoing tactic.
"Both UK and Scottish governments should also review the availability of financial support to businesses caught up in local lockdowns. We do welcome the intention to review within one week and sincerely hope this is brought under control swiftly."
The Federation of Small Businesses said local businesses in Glasgow and Moray would be “deeply frustrated” to learn of the measure.
Andrew McRae, Scotland policy chair, said: “Local businesses and their customers in Glasgow and Moray will be crushed by the news that restrictions are not going to be lifted.
“The damage of this change, especially in Glasgow, is exacerbated by the lateness of this announcement. It means wasted stock, disappointed customers and increased debt.
“Scotland’s largest city has faced tough restrictions for months and months, doing untold harm to local firms. While the action proposed may or may not be necessary, pushing it out the door at close of play on a Friday will further undermine independent businesses.”
Scottish Conservative leader Douglas Ross asked the First Minister to reassure people in both Glasgow and Moray the continued restrictions will be “short-term measures”.
He voiced concerns that £750 per week would not cover the loss of income felt by many businesses.
Scottish Labour leader Anas Sarwar also called for “fuller and speedier” business support.
Testing has been increased in both areas, and the vaccine programme has been extended to all over-18s in Moray in a bid to increase local protection.
The same measure will be taken in affected areas of the southside of Glasgow from Monday.
On Thursday NHS Grampian reported that cases in Moray were reducing, but expressed concern that some other local outbreaks had sprung up.
Chris Littlejohn, deputy director of public health at NHS Grampian, said: “The number of people coming forward for testing has increased and that it was possible the outbreak in Elgin may be starting to plateau – but it could be a further two weeks before figures show real signs of returning to normal and we cannot afford for any complacency at this point.”
Dr Linda de Caestecker, director of public health at NHS Greater Glasgow and Clyde, urged locals to follow Covid rules.
"The numbers can go up very quickly, and it is the responsibility of all of us to play our part and prevent further increases,” she said.