The announcement comes about a week after Murphy, a Democrat, rejected similar mask guidance from the Centers for Disease Control and Prevention, saying he wanted "more time on the clock" for people to get vaccinated.
Also on Friday, the state is lifting the requirement for maintaining 6 feet at all indoor and outdoor businesses such as restaurants, retail stores, gyms and casinos.
Businesses can still require masks:
-Murphy said businesses and entities overseeing indoor spaces may continue to require face masks for employees, customers, and/or guests
Masks will also still be required in:
-Health care settings, correctional facilities, and homeless shelters
-On airplanes, buses, trains, and other forms of public transportation
-In transportation hubs such as airports and stations
-Public-facing state offices, such as NJ MVC agencies
-Worksites that are closed to the public, including warehousing and manufacturing facilities
-Child care centers and facilities
-Youth summer camps
-Public, private, or parochial preschool program premises
-Elementary and secondary schools, including charter and renaissance schools
Those who are not fully vaccinated are still "strongly encouraged" to follow CDC guidance and wear a face mask in any indoor setting.
"Please be responsible and do the right thing - for your own safety and your community's safety," Murphy said.
Also on May 28:
-Requirement for maintaining six feet of social distancing in indoor and outdoor settings will be lifted, but businesses can still require social distancing if they choose
-Prohibition on dance floors at bars and restaurants will be lifted
-Prohibition on ordering and eating/drinking while standing at bars and restaurants will be lifted
Effective June 4:
-State will remove all indoor gathering limits.
-State will also lift the 30% limit on large indoor venues with a fixed seating capacity of 1,000 or greater.
"The steps we've announced today are the clearest signs of our commitment to carefully and deliberately reopening our state," Murphy said. "We continue to trend in the right direction with every indicator and our vaccination numbers have increased dramatically over the last two weeks."
Gov. Murphy: NJ to lift indoor mask mandate with some exceptions
Mixed reaction from residents
Murphy's announcement brought a sigh of relief to many businesses ahead of the holiday.
Tyler Dahl, who owns The Cubby Hole restaurant in Moorestown, said he wants everyone to feel comfortable, but he will not ask customers if they have been vaccinated.
"I think I'll let the honor system dictate. It's a little invasive to ask about people's medical history, and I believe this is probably a time and a place in which I do not feel as if I need to ask that," he said.
Not everyone is on board.
"I will continue wearing my mask for me and my household. We've been vaccinated, but I feel that there are a lot of people that have been dishonest and I want to wear my mask," said Jenia Moreland of Pennsauken.
"To be honest, I don't think people who are not vaccinated are going to be honest about it, so I would be concerned going in without a mask if the person next to me didn't have a mask on. I wouldn't know if they were truly vaccinated," said Karen Weisenberg of Mt. Laurel.
Management at Ponzio's Diner in Cherry Hill says the only thing that will be keeping them from filling every table is hiring enough staff.
We need to fill about 20 server positions right now," said Nick Fifis, a co-owner of the diner.
Fifis says he and his partners still need to talk about masks wearing and if they'll still require it.
Dennis Crocker of Pennsauken said he is fully vaccinated but still wears a mask in certain settings.
"I think the ones that were hesitant now will probably go out. I'm glad he said we don't have to wear the masks now, but like he said, everybody has got to make that decision," he said.
At William Robert Salon in Cherry Hill, their hours had to change to accommodate social distancing between clients.
"We had to go from a five-day-a-week schedule, which is what we always were, to seven days a week. Everyone had to work every other day," said owner William Moffett.
On Friday, they'll be able to fill more chairs and celebrate without masks on.
"Maybe some wine and champagne," said Moffett. "I think Friday's going to be a really fun day."
Murphy defends delay
The state's vaccination rates have been climbing, with Murphy pledging to fully inoculate 70% of the population by June 30.
Murphy faced a torrent of criticism over the delay, especially from Republicans who are hoping to defeat him in November as he seeks reelection to a second term.
He dismissed it, though, and said the decision focused on avoiding more deaths from COVID-19.
Health Commissioner Judy Persichilli pointed to daily deaths still in the double digits and the daily infection rate hovering above lows seen last summer as rationales for continuing the mask mandate.
In addition to wanting more time to vaccinate people, Murphy also explained his decision to delay relaxing mask requirements by saying he thought it was unfair for front-line workers at grocery stores, for example. He said they'd have to unfairly police every patron.
Nearly 4.1 million New Jersey residents have been vaccinated. That's nearly half of the state's population.
The Associated Press contributed to this report