The 400 or so athletes heading to London could have their rooms searched and face punishment up to and including expulsion if found to be in breach of the ban, Australian Olympic Committee (AOC) chief John Coates told reporters.
"We have decided to amend our team medical manual to make it absolutely unequivocal that we prohibit the use of Stilnox and other related drugs," he said.
"If, in extreme circumstances, they still need to be prescribed drugs, there is a short-acting drug temazepam, which does not have the same addictive and hallucinatory effects as zolpidem."
Coates also said the AOC would be "better highlighting" advice with regard to the use of caffeine.
"We are very worried about the vicious cycle of athletes taking caffeine as a performance enhancer and then needing to take drugs such as Stilnox to get to sleep," he said.
"We've done all this because our overriding obligation is to protect the health of our athletes."
Hackett won the 1,500 metres freestyle gold at the Sydney and Athens Olympics but came up just short of a third successive title in Beijing four years ago.
In an interview with the Sunday Herald Sun newspaper last weekend, the 32-year-old said he had been prescribed Stilnox, which is not banned by the World Anti-Doping Agency (WADA), to battle insomnia and described it as "evil".
"I have to acknowledge that this was only brought to my attention when I read Grant Hackett's revelations," Coates said.
"If I'm to blame for not having got on top of it earlier, I accept that blame."
Hackett's reputation has taken a battering in recent months with stories in the local media about a messy separation from his wife and pictures showing his wrecked apartment causing a charity to sever ties with him.
His former coach Denis Cotterell told Tuesday's Australian that he believed the use of the drug in Beijing had contributed to Hackett's failure to become the first swimmer to win gold in the same event at three successive Olympics.
"For sure, that contributed to his lack of clarity in the 1500m final," he told the paper. "I've got no doubts about that."
Coates said Hackett had told him he had been introduced to the drug at the 2003 world swimming championships and the use of Stilnox had been "widespread" among swimmers by the time of the Beijing Olympics.
Chef de Mission Nick Green had the right to expel athletes from the team for "blatant disregard" for the ban, Coates said, and team officials would police it in the Athletes' village.
"We've got the right to enter rooms and to seize," he said.
"But everything the team management does has to be reasonable or it could be tested at the Court of Arbitration for Sport (CAS)."
"A lot can happen in the pressure of an Olympic Games... and we're going to take the temptation away from them," he added.
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