The Northern Beaches will be placed into lockdown from 5pm Saturday to help manage the COVID-19 cluster.
The state recorded 23 cases on Saturday, 10 of which were announced on Friday.
This brings the total outbreak to 39 as health officials scramble to find the source.
Premier Gladys Berejiklian said two of the cases are under investigation, but suspects they are connected to the Avalon outbreak.
All residents in the Northern Beaches will be under mandatory restrictions from 5pm.
There will be only four reasons to leave the house which includes, exercise, medical attention, shopping for essential items and on compassionate grounds.
“We are hoping that will give us sufficient time to get on top of the virus so we can then ease up for Christmas and the New Year moving forward,” Ms Berejiklian said.
“For the rest of Sydney, can I please ask everybody to abandon nonessential activity until that time,” she said.
“We do not want the virus to spread outside of the Northern Beaches.
“We do not want perhaps, unidentified strands of the virus outside of Sydney, outside of the Northern Beaches, to start getting to an extent which concerns us.
“Please limit your activity. We are asking you to do this in good faith … If you are planning a night out tonight, we ask you to consider changing those plans on staying at home.
“We want people to stay at home tonight and the next few nights so that we can ensure the virus does not spread.”
A further seven cases have also been identified in hotel quarantine.