The decision was taken at Cabinet meeting presided over by Chief Minister Sheila Dikshit.
Officials said the use of plastic cover/pouch to pack magazines, invitation cards, greeting cards will also be prohibited.
Green groups have been demanding a blanket ban on plastic bags in the capital for long.
Following a Delhi High Court order, the government had in January, 2009 imposed a ban on the use of plastic bags in various markets, shopping malls, hotels and hospitals but it has not produced any desired result.
The government has now decided to impose the ban as per provision of the Environment (Protection) Act, 1986 under which the violators could face imprisonment up to five years and fine of upto Rs 1 lakh or both.
"The Cabinet has decided to impose a ban on manufacture, sale, storage and usage of plastic bags in Delhi considering its adverse impact on the environment and ecology," Dikshit, known for her environment-friendly initiatives, said.
She said plastic bags have been causing blockage of sewerage network in the city resulting in serious public health-related problems.
Officials said the Cabinet took the decision as the existing ban on plastic bags, which did not include manufacturing activities, have not produced any desired results.
As per the decision, no person including shopkeepers, vendors, wholesalers, retailers and hawkers will be allowed to sell, store or use plastic carry bags for supply of any goods.
Plastic carry bags for use, as specified under the BioMedical Waste (Management and Handling) Rules, 1998 will not be covered under the ban.
Officials said the ban would come into force after issuance of a notification to this effect. "The notification will be issued soon," they said. (More)