Sandy could bring winds of up to 70 mph and dump 1 to 4 inches of rain to parts of the Granite State, Gov. John Lynch's office said.
Lynch urged drivers to stay off the state's roads and asked employers to release workers early Monday afternoon to avoid travel after 3 p.m. when high winds and heavy rains were expected to intensify.
"This will be significant storm for New Hampshire, and we are urging all citizens to exercise common sense and extreme caution," Lynch said in a statement after declaring a state of emergency.
The governor asked the National Guard to place 100 troops on active duty, with 100 more on standby.
Two people in Morris County were killed Monday evening when a tree fell on their car, authorities said. A male of unknown age was also killed in Hawthorne when a tree fell on a house, according to Hawthorne Fire Chief Joseph Speranza.
Several feet of water were flooding parts of Atlantic City on Monday, and authorities worked to evacuate hundreds of people from West Atlantic City, where waters were "dangerously high," said Linda Gilmore, a spokeswoman for Atlantic County.
Atlantic City was under curfew from 6 p.m. Monday until 6 a.m. Tuesday.
"When Mother Nature sends her wrath your way, we're at her mercy, and so all we can do is stay prayerful and do the best that we can," Atlantic City Mayor Lorenzo Langford told CNN.
He said the city could get as much of 5 feet of water, and video showed downtown streets looking like rivers.
New Jersey was the first to announce mandatory evacuations. The state's barrier islands from Sandy Hook south to Cape May were ordered to clear out, along with Atlantic City's casinos.
"We're at a moment now where evacuations are no longer possible. And we're no longer able to come and rescue people," Gov. Chris Christie said Monday afternoon.
Addressing those who chose not to evacuate, he said: "We will not be able to come and help you until daylight tomorrow. Please try to hunker down and stay safe until then."
All state offices were closed Monday, with only essential employees expected to report to work, Christie announced. The same will be true Tuesday.
New Jersey Transit came to a halt and will remain suspended indefinitely. Flooding from Sandy also forced the closure of Newark Liberty International and Teterboro airports.
Obama declared a state of emergency in New Jersey, Christie announced Monday.
"We knew that this was going to be a very dangerous storm, and the storm has met our expectations. The worst of the weather has come, and city certainly is feeling the impacts," New York City Mayor Michael Bloomberg said late Monday.
Hundreds of thousands of New Yorkers were without power. A slow surge of water flooded parts of Lower Manhattan, and downed trees littered the city, sparking fires, the mayor said.
"These are not games. We've said from the very beginning, this is a once in a longtime storm," he said.