Mexican President Felipe Calderon said in a televised address Wednesday night that only essential businesses like supermarkets, hospitals and pharmacies would stay open.
Police and soldiers will still be on duty.
"There will be no government activities - those that are not fundamental for citizens - nor any private-sector activities that are not fundamental to common life," Calderon said.
The announcement came hours after the World Health Organization upped its pandemic alert level to a five out of six, warning that a pandemic is imminent.
The World Health Organization said Thursday there are 257 confirmed cases of the strain of H1N1 flu virus, and urged people to stop using the term "swine flu" because it is misleading and causing concern over pork products, even though experts the flu is not spread through eating pork.
Switzerland and the Netherlands were the latest countries to report swine flu infections Wednesday. Cases have been confirmed in 11 states in the United States, according to CDC numbers Thursday.
Mexico, Canada, New Zealand, Britain, Germany, Spain, Israel and Austria all have confirmed cases.
School in Mexico had already been canceled nationwide through Tuesday, and some schools in the U.S., where the number of confirmed cases continues to grow daily, are following suit.
As of midday Wednesday, the latest national accounting available, about 100 of the nation's 132,000 schools had closed, reported the AP.
U.S. federal health officials said Thursday the number of confirmed cases had risen to 109. President Barack Obama told citizens in a press conference marking his 100th day in office Wednesday night that the government "is prepared to do whatever it takes to control the impact of this virus."
Mr. Obama said his administration is stock piling needed medical supplies and praised past planning efforts by the Bush administration for the 50 million doses of antiviral medications that are on hand for this emergency.
However President Obama said closing the border with Mexico would not be an appropriate response to the outbreak.
Form the perspective of health experts, "it would be akin to closing the barn door after the horses are out, because we already have cases here in the United States," he said.
Members of Congress warned Wednesday that public pressure to close the border was growing.
The United States, the European Union and other countries have discouraged nonessential travel to Mexico. EU officials held an emergency meeting on the outbreak Thursday and deflected a call from the France government to stop all flights to Mexico.
France's health minister acknowledged the suggestion did not receive much support.
"A certain number of countries did not judge that in the current situation these measures should be put in place immediately," Roselyne Bachelot told reporters, according to Reuters.
Vice President Joe Biden said on NBC's "Today" show Thursday that he was telling family not to fly or take the subway for health safety reasons, but within hours his office released a statement saying he was referring to travel to Mexico.
Newly-confirmed U.S. Health and Human Services Secretary Kathleen Sebelius said preparations are continuing for a possible vaccine for the H1N1 virus.
"Manufacturers are on the alert," Sebelius said, reported Bloomberg. "Once the testing protocol is done and the dosage protocol is done they are ready to begin production, should that be necessary."
Continuing the process towards a vaccine has been encouraged by the WHO. Keiji Fukuda, acting WHO assistant director-general also told reporters Swiss drug maker Roche will step up production of Tamiflu to deal with the infection.
He also said the pandemic alert will not be raised to a level six right away.
"Today that evidence holds steady," Fukuda said.