Blackburn with Darwen is facing a "rising tide" of coronavirus cases centred on terraced houses with high numbers of occupants, the area's public health director has said.
The Lancashire town brought in extra restrictions on Tuesday following a spike in infections.
Prof Dominic Harrison said the majority of new cases were in the south Asian community.
He said a phased lockdown could happen if the rise was not halted by 27 July.
For the next month, the 148,000 people who live within the Lancashire authority have been told to observe the new rules in a bid to avoid a Leicester-style local lockdown.
However, Blackburn with Darwen's public health director Prof Harrison said they would "reverse the measures one by one not a full lockdown like Leicester".
The new measures include tighter limits on visitors from another household, and officials have called on people to bump elbows in place of handshakes and hugs.
Residents are being told to wear cloth face coverings in all enclosed public spaces, including workplaces, libraries, museums, health centres and hair and beauty salons.
"We have we had 114 cases in the last two weeks and 97 are south Asian which is why we want to minimise household contact," Prof Harrison said.
"What we are seeing from looking at the postcode data in the last two weeks is a single house being infected and and the whole household becoming infected creating household clusters in part of the town."
He said it was causing "rising tide events that they are mainly in south Asian areas and areas with a high number of terraced houses and occupied by four or more five people".
Faz Patel MBE, who is a local adviser on community cohesion in Blackburn, said he was worried young people were ignoring advice on social distancing.
"What is happening since the easing of lockdown, we are seeing a lot of young Asian men and other young people spending time with their friends and going to their homes where they might spread the virus to their parents or grandparents," he said.
"We have to get the message out we can't go into another lockdown that would have a detrimental effect on our local area.
"It is going to be difficult, people started going to see their families last week but we have to stick to the new measures. People have got to understand no hugs or handshakes even though it is part of our culture."
Councillor Saima Afzal said it would be a "disaster" for businesses if Blackburn went back into lockdown.
"We know there is an issue, so somewhere people aren't following the rules," she said.
"We are trying everything to get the message out there, on different channels and in different languages as we can't rely on one form of communication."
Where have cases been rising?
Although new cases of coronavirus are falling across England, the daily data shows Blackburn with Darwen is not alone in seeing a high rate of cases.
Pendle in Lancashire is currently second in terms of new cases with the equivalent of 76.6 per 100,000 population, based on the week to 11 July, although this is significantly behind Leicester, which has had a local lockdown imposed.
More than half of Pendle's new cases for that week were confirmed over two days and numbers have fallen again since to about six or seven a day.
Herefordshire, meanwhile, has surged into the top 10 because of the outbreak among vegetable pickers at AS Green and Co.
These figures are changing every day as more positive test results are added to the data.
Data obtained via the government coronavirus dashboard
Blackburn with Darwen Borough Council has also announced changes to Darwen Street in Blackburn to allow more social distancing and make people feel safer in the town centre.
From Thursday, footways will be widened and some parking bays removed to help separate people queuing for takeaways and pubs.
Health Secretary Matt Hancock said the council was doing "a fantastic job".
"We've gone in and are supporting them, working with them, for instance put in much more testing. And then they've taken these steps locally and I applaud that," he said.
"This is exactly the sort of local action we want to see."
Meanwhile, public health bosses in East Lancashire have issued an "early warning" for the nearby area of Pendle which has also seen a recent spike in cases.
Lancashire County Council said it had no plans to issue stricter lockdown restrictions because Pendle did not have the same perceived risk of the virus spreading within communities as in Blackburn.
Dr Sakthi Karunanithi, director of public health for Lancashire, said: "With the slight increase in the Covid-19 infection rate in Pendle, it's really important to stay alert to the risks."