Sampling of treated water - including at the city's main reservoir of Warragamba Dam - revealed six sites with detectable levels of synthetic chemical compounds known as PFAS.
Such chemicals are found in everyday appliances from non-stick pans to clothing, insecticides and food packaging.
Once in the environment, they don't degrade further, earning them the nickname "forever chemicals".
In April, the US Environmental Protection Agency found there was "no safe level of exposure" of two classes of PFAS chemicals in drinking water and they were likely to cause cancer.
The US says there's "no safe level of exposure" to two types of PFAS chemicals in drinking water. (Jason O'BRIEN/AAP PHOTOS)
Sydney Water testing conducted in June and published online without further notification shows one group of the chemicals was found in filtered water from Warragamba, albeit on the cusp of detectable levels.
Two other groups of the chemicals tested were undetectable at Warragamba, which supplies 80 per cent of Sydney's drinking water.
Each result was below Australian drinking water standards, however those guidelines have been criticised as being out of date.
The United States recently set an enforceable threshold of four nanograms per litre, close to current detection levels.
The National Health and Medical Research Council, which shapes Australia's water rules, is reviewing its guidelines relating to the chemicals.
Dr Jeremy McAnulty says Sydney's water supply is safe to drink. (Bianca De Marchi/AAP PHOTOS)
NSW Health protection director Jeremy McAnulty said he didn't want to pre-empt the review's findings but everyone should be reassured Sydney water was safe and met the relevant Australian standards.
"Sydney Water and other utilities regularly monitor for various parameters in drinking water to ensure it's safe and to identify risks and that's what's happening here," he said on Tuesday.
All NSW drinking water catchments will be monitored for PFAS annually, while water-filtration plants at Katoomba and Blackheath in the Blue Mountains will be tested monthly.
That is because they had the highest results at about 30 nanograms per litre of two potentially harmful chemicals.
"It's not above our guidelines, but just to be cautious we have chosen to get some additional monitoring for that system so we have a better understanding," Water NSW executive manager Fiona Smith said.
Fiona Smith says additional monitoring will give authorities more information. (Bianca De Marchi/AAP PHOTOS)
The published results did not surprise or alarm PFAS expert and University of Sydney head of civil engineering Stuart Khan.
"We're talking about very safe, very low levels of exposure that there is no reason for us to assume that it's not safe to drink," he told AAP.
"The more important point is that it won't be their major source of exposure."
The same chemicals were in household dust, clothing, food and food packaging such as plastic-covered paper, Professor Khan said.
"Even if you were to avoid the drinking water, it doesn't actually have a significant impact on your overall level of exposure to these chemicals, because you're being exposed through food, packaging, clothing, the entire planet around us," he said.
The US EPA has taken a hardline approach to the chemicals in drinking water, setting health-based goals to reduce exposure to zero and forcing water authorities to publicise PFAS levels and clean up contaminated supplies.
The US expects that over many years the regime will prevent exposure to the chemicals via drinking water for about 100 million people and prevent thousands of deaths.
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