However, a mask mandate remains in place for indoor activities and public transportation, he said.
Widodo also said all fully vaccinated travellers will no longer be required to undergo COVID-19 tests to enter Indonesia.
The announcements came two weeks after millions of Indonesians celebrated the Eid al-Fitr holiday at the end of the Muslim holy moth of Ramadan by travelling to see their families, ending two years of pandemic restrictions and travel curbs.
COVID-19 cases have continued to decline, prompting the government to relax its mask policy.
"When people are doing outdoor activities, or in open areas that are not crowded with people, then they are allowed not to wear masks," Widodo said in a televised address.
In March, Indonesia lifted quarantine requirements for overseas visitors, joining a number of other countries in the region including Malaysia, Singapore, Thailand, Cambodia and the Philippines that have announced or already made such moves.
The country has largely recovered since an Omicron-driven surge peaked at about 64,700 cases a day in mid-February.
New confirmed daily infections have fallen to about 200 and about 80 per cent of the eligible population of 208 million has been fully vaccinated.
The government has already lifted many restrictions on mobility that have been in place for two years.
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