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The hurricane will hit the Louisiana city exactly seven years after it was devastated by Hurricane Katrina, but it is a much less powerful storm.
The city has closed its new floodgates in a bid to protect it from the effects of high waters brought by sustained winds of up to 80mph (130km/h).
Isaac killed at least 24 people in Haiti and the Dominican Republic.
It has also caused significant flooding and damage across the Caribbean and forced a day's delay to the start of the Republican party's congress in Tampa, Florida.
At 00:00 local time (05:00 GMT) the centre of the Category One hurricane was estimated to be 70 miles (110km) south of New Orleans and moving at about 7mph (13km/h), according to the US National Hurricane Centre (NHC).
The wind has started to build up and the rain lashing down in the French Quarter of New Orleans as the narrow, high-sided streets is amplifying the wind speed. Debris is starting to be tossed around on Canal Street, as roadworks are being pulled apart by the high winds and trees shaken almost from their roots.
Some areas have lost power already. The streets have been cleared of all but the foolhardy - and the journalists with TV satellite trucks parked in the lee of buildings.
The timing of the storm has brought so much attention to this city devastated by Hurricane Katrina when it struck seven years ago.
I sat through the storm then in a hotel room and watched as 4x4s were pushed along roads with the force of the wind, wrought iron staircases ripped off buildings and windows were blown out.
The wind speeds so far are just a third of those during Katrina but it's the volume of water falling and the storm surge being driven onshore which threatens homes and those who have decided to sit out the storm.
Many people have chosen to stay - boarding up their doors and windows and settling in for a long night, hoping Hurricane Isaac will be kinder to their city.
Tens of thousands of people have been told to leave their homes in low-lying areas of Louisiana and Mississippi, though a mass evacuation has not been ordered. Storm warnings are also in place in parts of Florida and Texas.
Officials say Isaac is likely to weaken before it reaches New Orleans.
"We don't expect a Katrina-like event, but remember there are things about a Category 1 storm that can kill you," said New Orleans Mayor Mitch Landrieu.
Of particular concern are storm surges, with peaks of up to 3.7m (12ft) forecast in parts of Mississippi and southeastern Louisiana. Rainfalls of up to 50cm (20 inches) are forecast across wide areas along with a high chance of isolated tornadoes along the coast.
The bowl-shaped city of New Orleans is particularly vulnerable to storms, with the centre of the city the furthest below sea-level.
But Mr Landrieu said that the 8m-high levee gate which now protects the areas of the city that were badly flooded in 2005 had been closed since Tuesday morning.
Many residents of New Orleans have chosen to secure their homes but stay put, saying they were not too concerned by Isaac.
"I feel safe," said Pamela Young from her home in the Lower 9th Ward, a neighbourhood devastated by Katrina.
"Everybody's talking 'going, going', but the thing is, when you go, there's no telling what will happen. The storm isn't going to just hit here."
"If the wind isn't too rough, I can stay right here. If the water comes up, I can go upstairs."
Nazareth Joseph, who works at a hotel in French Quarter and was in the city during Katrina, said he had a busy week ahead so would stay where he was.
Latest weather updates from National Hurricane Center
Red Cross searchable website for disaster shelters
List of area curfews from local broadcaster WWFL
Emergency alerts from the City of New Orleans
Evacuation map from the New Orleans Times-Picayune
New Orleans power outage map
"We made it through Katrina; we can definitely make it through this. It's going to take a lot more to run me. I know how to survive," he told the Associated Press news agency.
By Tuesday night, more than 58,000 homes in New Orleans were reported to have lost power. Outages have also been reported across Louisiana and Mississippi, affecting more than 200,000 homes and business.
President Barack Obama has declared an emergency in Louisiana and Mississippi, allowing federal funds to be released to local authorities.
Speaking from the White House, he warned residents along the Gulf Coast to heed warnings, including those to evacuate, saying: "Now is not the time to dismiss official warnings. You need to take this seriously."
Shortly before Isaac reached hurricane status on Tuesday, Louisiana Governor Bobby Jindal said the emergency declaration fell short of the federal help he had asked for.
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