An expanded lockdown now covers 5m people in Greater Sydney, as well as the Blue Mountains, Central Coast and Wollongong.
Cases of the highly infectious Delta variant now stand at 110.
NSW Premier Gladys Berejiklian said on Sunday that she expected that figure to rise.
"Given how contagious this strain of the virus is, we do anticipate that in the next few days, case numbers are likely to increase even beyond what we have seen today because we are seeing that people in isolation, unfortunately, would have already transmitted to all their house contacts," she said.
Stay-at-home orders will remain in place until 9 July for all of Greater Sydney and the other specified areas.
Police have said they will use number plate recognition technology to monitor vehicles and ensure people have not strayed out of their lockdown zone.
Virgin Australia said on Sunday it was contacted passengers and crew on five recent domestic flights, after a crew member had tested positive in Melbourne.
In the Northern Territory, Darwin and two other towns have entered a 48-hour lockdown after four cases new cases were reported.
On Saturday, New Zealand paused its quarantine-free travel bubble with all of Australia for three days because of the latest outbreak.
The travel corridor between the two neighbours was opened in April. Travel between New Zealand and specific Australian regions has been closed for short periods as outbreaks occurred, but this is the first time the bubble has been shut with all of Australia.
Australia has consistently maintained very low rates of Covid transmission and this is the first lockdown in Sydney - its largest city - since December.
The outbreak of new infections emerged a week ago in Bondi, the famous beach suburb, and spread first into the city centre and then to its western fringes.
It has been linked to a driver who transported international arrivals from the airport.
State Health Minister Brad Hazzard described the Delta variant - which first emerged in India - as a "very formidable foe".
"No matter what defensive steps we're taking at the moment, the virus seems to understand how to counter-attack," he said.
In a video message, Prime Minister Scott Morrison thanked residents for their patience and forbearance, adding: "Together, Sydney, we'll get through this."
"This pandemic, sadly, is still raging all around the world and from time to time it will have its impact here in Australia," he said.
The latest outbreak has fuelled criticism of the federal government's slow vaccination rollout.
So far, just over 3% of the adult population have been fully vaccinated and about 25% of Australians have received a first dose. Government critics have argued that cities will not need to endure lockdowns again if a majority of the population is vaccinated.