The restrictions will begin at midnight on Friday after health officials struggle to contain a recent spike in Delta variant cases. On Friday, Gladys Berejiklian, New South Wales state Premier, told reporters that people would not be allowed out except for urgent reasons.
Ms Berejiklian said: “We don't want to see this situation linger for weeks, we would like to see this situation end sooner rather than later.”
The lockdown will only cover the downtown and eastern suburb areas of the city, which includes Bondi Beach.
Australians will be allowed to leave their homes only for essential work, education, grocery shopping or outdoor exercise.
Ms Berejiklian urged those who live or work in four local government council areas in Sydney to stay at home except for urgent reasons.
On the same day the lockdown was announced, 22 local cases were reported.
It is the largest rise in infections since the first case was detected in Bondi last Wednesday.
The case last week was discovered in a limousine driver who transported an overseas airline crew.
Australia's most populous city is home to a population of 25 million.
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At time of writing, New South Wales has recorded 74 new cases in data collected between June 10-23.
Cases in the South East Australian region have not reached such levels since December.
Australia has one of the lowest total Covid case rates in the world, recording around 30,408 since the pandemic began.
Of that total case number, a little over 5,500 have been recorded in New South Wales.
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In addition, the country has recorded less than a thousand deaths.