A third person has died from COVID-19 at the North West Regional Hospital, which brings the state's fatality rate to four.
Health Minister Sarah Courtney confirmed the death on Friday.
"I send my sincere condolences to his family and his friends," she said.
Coronavirus: All the latest updates on COVID-19 for Tasmania
"This just strengthens my resolve as the Minister for Health in our response to coronavirus."
The death follows the confirmation of four more cases at the NWRH overnight, bringing the state's total to 111.
The growing COVID-19 outbreak at the North West Regional Hospital has triggered an "extraordinary response", including asking more than 100 staff to go into quarantine - adding to the 51 already isolating.
Chief Medical Officer Professor Tony Lawler said authorities had "potentially underestimated" the number of close contacts to known cases.
"Over the last 24 hours there has been a clarification and reinterpretation of what makes a close contact," he said.
IN OTHER NEWS:
He said the steps went 'above and beyond the guidelines', but that it would save valuable time in analysing contact tracing.
"Given the difficulty in analysing ... we will simply regard any staff member who has worked in an area with staff who tested positive as close contacts," he said.
"We make the decision for their own protection and peace of mind that we would quarantine that cohort."
He said testing would be offered to all in quarantine, regardless of symptoms.
Ms Courtney also announced a major reshuffle of North-West services, including a public takeover of the North West Private Hospital.
"This decision has been made to ensure we have a consistent approach across both sites," she said.
The NWP and the NWRH remain open, however this is a very dynamic situation."
The emergency department will close at the Mersey Hospital on Friday night.
Ambulance services east of Penguin will now take patients to Launceston.