Strong winds overnight brought smoke from fires inland, pushing the air quality in Australia's largest city to beyond "hazardous" levels at times.
On social media, locals have described hazy skies and the stench of smoke in their homes.
About five million people live in the state capital of New South Wales, which has been affected for weeks by fires.
Six people have died in bushfires in the state's north since October.
Sydney residents were warned about severe fire danger on Tuesday, as temperatures soared to 37C (98.6F) in the city's west.
Parts of the city recorded air pollution levels at eight times higher than the national benchmark.
Health officials advised people to stay indoors and avoid physical activity. They also shared first aid guides on how to help asthma sufferers and others with respiratory problems.
"The smoke is likely to hang around for the next few days," warned the New South Wales Rural Fire Service.