Asylum seekers entering Hungary, as well as those currently in the country, are to be confined in camps composed of converted shipping containers while their applications are processed.
Three weeks ago, Hungary's parliament approved the systematic detention of all asylum seekers in a move that has drawn criticism from human rights groups and the UN.
The interior ministry has said the purpose of the restrictions, which begin today, is to "prevent migrants with an unclear status from moving freely around the territory of the country and the European Union, and to thereby reduce the security risk of migration".
According to the government, 324 shipping container homes have been installed at two separate locations called "transit zones" built into a fence that Hungary has erected along its southern border with Serbia.
EU member Hungary previously systematically detained all asylum applicants but suspended the practice in 2013 under pressure from the EU, the UN refugee agency and the European Court of Human Rights.
The UN High Commission for Refugees has warned Hungary it will be breaking international and EU law if it detains asylum-seeking children in shipping containers on its border with Serbia.
The new law says all would-be refugees over the age of 14 will have to use the containers, but the UNHCR says placing children in them would break international and EU law.
The UNHCR also said that systematic detention will "have a terrible physical and psychological impact on women, children and men who have already greatly suffered".
According to refugee rights group the Hungarian Helsinki Committee, 400 asylum seekers are currently housed in the country's internal camp network, and now face relocation to the border camps.
A second "smart fence" complete with night cameras, heat and movement sensors, and multilingual megaphones warning against crossing the barrier is also under construction, with completion scheduled by May.
Amnesty International has also condemned the new rules for failing to meet Hungary's international obligations to asylum seekers.