Current agreements in foreign currencies must be changed within 30 days, it said.
The central bank's move makes Turkey's interest rate one of the highest in the world.
There had been indications from Turkey's central bank that it would raise rates, after inflation came in at almost 18% in August, according to official data.
"For a country that is in really deep distress like Turkey, what is important is to restore some of the independence of the central bank and take measures to stem the currency's fall".
"Interest rates are the cause, inflation is the result. If you say 'inflation is cause, the rate is the result, ' you do not know this business, friend".
"We can not allow the use of the tool of exploitation that is interest rates", Erdogan told a meeting in Istanbul on Thursday.
Following the news, the Turkish lira rose 5 percent in value against the U.S. dollar, reversing its 42-percent fall this year against the American currency.
Washington has imposed sanctions on two Turkish ministers and doubled tariffs on steel and aluminum imported from the country.
The Turkish currency lost almost a quarter in value against the dollar in August. Growth slowed to an annual rate of 5.2% in the second quarter, from the first quarter's 7.4%.
Countering a trend popular within Turkey, especially within the retail sector, the government said any contracts previously made in foreign currency but which were now in effect must be converted into lira within 30 days.
Some analysts predict that the decree on property transactions could have a negative impact on property sales in Turkey, especially by overseas investors.
Turkish President Recep Tayyip Erdogan has accused the United States of launching what he called a "heinous economic attack" on Turkey after the national currency lira hit a record low following USA sanctions.
Reuters reports the latest comments from Turkey's President Erdogan, with the key headlines found below.
It remains to be seen how the news will sit with Erdogan, however.
Zafer Sonmez, head of Turkey and Africa for Malaysia's government investment vehicle Khazanah Nasional Bhd, was named general manager.
Erdogan said last September that the fund was to be reorganised after dismissing Mehmet Bostan, its chairman, over its failure to meet targets.
The fund was set up in the aftermath of the attempted overthrow of Erdogan in July 2016.
The fund's other assets include the state's minority 49.12-percent shareholding in flag carrier Turkish Airlines, as well as state-owned enterprises such as the PTT Turkish post office.
Such funds can be used for large projects, maintaining pensions and national welfare programmes, or in times of crisis.
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