Petty Officer Aimee Mejia, 21, was involved in a three-car accident on the island on Saturday, injuring two people, said police.
It is the latest incident involving US troops based in Okinawa.
Many Okinawans have long campaigned against the heavy US military presence.
Police said PO Mejia was driving the wrong way down a street and hit two vehicles. A local woman was left with a cracked breastbone.
Her alcohol levels were about six times the permissible level, Japan's NHK network reported.
Under the US Navy's order, personnel will not be allowed to drink at all, on or off base, and cannot leave the base grounds, except for commuting and necessary errands such as picking up their children or groceries.
The Navy said the "liberty curtailment" would remain in place until all personnel had gone through extra training, while alcohol was banned outright until officials "are comfortable that all personnel understand the impact of responsible behavior".
"These measures are not taken lightly," Rear Adm Matthew Carter, Commander of Naval Forces Japan, said in a statement.
"For decades, we have enjoyed a strong relationship with the people of Japan. It is imperative that each Sailor understand how our actions affect that relationship, and the US-Japan Alliance as a whole."
The US military previously said it was co-operating with the Japanese investigation into the alleged drink-driving case, and expressed sympathies for the injured people
Okinawa is home to more than half of the 50,000 American military personnel based in Japan. Opposition to their presence has rumbled on for years, with anger resurfacing each time a military member is involved in a crime.
US personnel were already under curfew and observing a 30-day mourning period after a civilian military employee was arrested on suspicion of dumping a local woman's body last month.
Prime Minister Shinzo Abe has expressed outrage over the incident, and raised the issue with US President Barack Obama at the G7 summit in Japan.
The US Navy has banned all its personnel in Japan from drinking alcohol and has restricted off-base activity after a sailor was arrested on suspicion of drunk driving.