The evacuation of New Orleans becomes mandatory at 8 a.m. Sunday along the vulnerable west bank of the Mississippi River, and at noon on the east bank, according to the Associated Press.
Nagin called Gustav the "mother of all storms" and told residents to "get out of town. This is not the one to play with."
Gustav strengthened back into a hurricane Friday as it left Jamaica and headed for the Cayman Islands, still on track to reach the U.S. gulf coast by Tuesday, the National Hurricane center said Friday.
On Saturday, the storm's center moved into the Gulf of Mexico from Cuba late Saturday, the National Hurricane Center in Miami. Top winds were near 140 mph.
The National Hurricane Center issued a hurricane watch for Alabama, Mississippi, Louisiana and part of Texas, meaning hurricane conditions are possible within 36 hours.
Winds, rain and flooding have killed at least 72 people in Haiti, the Dominican Republic and Jamaica this week. Gustav is the biggest storm to threaten the U.S. gulf coast since Hurricanes Katrina and Rita three years ago.
On Friday, New Orleans residents paused from preparing for the storm to observe the third anniversary of Katrina. About 150 residents gathered in a cemetery for a symbolic burial of the 80 unidentified victims of Katrina. Bells rang throughout the city at 9:38 a.m., three years to the hour after the city's levees began to give way.
Mississippi Gov. Haley Barbour said Friday that the Katrina and Rita victims still living in 2,700 emergency trailers and 2,800 emergency cottages along the coast should begin evacuating on Sunday.
"Let me say to the people of Mississippi: This is not a time to panic, but it is a time to get prepared," Barbour said at a news conference, according to the AP.
Nagin said Friday that he would issue an evacuation order if forecasts called for a Category 3 storm to arrive within 72 hours. Unlike in 2005, there will be no "shelters of last resort" like the superdome, and 700 buses are on standby to help with the evacuation.
Homeland Security Secretary Michael Chertoff, in the area to help with preparations, said that federal officials would defer to state and local communities to make the evacuation calls.
"We try not to pull the trigger to early on evacuation because you don't want to have false alarms," he said, according to AP.
Louisiana Gov. Bobby Jindal declared a state of emergency, and Texas Gov. Rick Perry issued a disaster declaration, setting the stage for federal assistance to the states. Together the governors put 8,000 National Guard troops on standby.
Major oil companies were also shuttering their offshore rigs in advance of the storm. The Gulf of Mexico holds 4,000 oil rigs, and thousands of workers have already been evacuated. Analysts predict the storm could send gas prices back over $4 per gallon.
Energy Department official Kevin Kolever said Friday that the U.S. could release up to 4.4 million barrels of oil from its strategic reserve to offset any disruptions due to the storm, the AP reported.