Forecasters said it was too early to say whether the city, which is still struggling to rebuild after Katrina, will take another direct hit.
Ray Nagin, the mayor of New Orleans, warned residents: "If you stay, you're on your own."
Roads around the city were jammed as thousands of people in cars and hundreds crammed into buses attempted to flee.
Nagin said the storm could strike New Orleans on Monday morning local time, but forecasters had earlier warned it was expected to make landfall early on Tuesday.
Most hotels were closed and the city's airport was preparing to shut down on.
Compulsory evacuation
Nagin has told New Orleans 240,000 residents that evacuation is compulsory on the city's west side of the Mississippi river, while a dusk-to-dawn curfew would operate on the east bank.
Al Jazeera's Cath Turner, reporting from New Orleans, said anyone found breaching the curfew could face arrest or be ordered to return home.
"This is the real deal, not a test," Nagin said as he issued the order.
"For everyone thinking they can ride this storm out, I have news for you - that will be one of the biggest mistakes you can make in your life.
"Looting will not be tolerated. We have doubled the police force and doubled the national guard ... looters will go directly to jail."
"Our call is for you to evacuate now."
'Fears may be exaggerated'
Forecasters have been more moderate in their predictions, saying the storm should make landfall somewhere between western Mississippi and East Texas, where evacuations were also under way.
Turner said: "There's criticism that the fears may be exaggerated.
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Over a million people in New Orleans have been evacuated ahead of the giant storm [AFP]
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"Some people say they are based more on political concerns, after the fallout from Katrina, rather than a real sense of danger".
John McCain, the US presidential nominee for the Republican party, said most activities planned for the first day of his party's convention in Minnesota, Missouri, on Monday would be suspended because of the hurricane emergency.
"I hope and pray we will be able to resume some of our normal operations as quickly as possible," McCain said.
Federal agencies working in New Orleans, which had failed to cope with the challenge of Hurricane Katrina, say they are well prepared to handle the evacuations this time.
Gustav has killed more than 80 people in the Caribbean with the hardest-hit countries being Jamaica, the Dominican Republic and Haiti - the hemisphere's poorest nation.
Energy companies, whose 4,000 platforms in the Gulf produce a quarter of US crude oil and 15 per cent of its natural gas, have been evacuating personnel and shutting down three-quarters of their oil production.
Katrina and Hurricane Rita, which followed it three weeks later, wrecked more than 100 Gulf oil platforms.