Some 516 infections were detected from more than 90,000 tests on Thursday, but no new virus related deaths were reported, nor any new Omicron variant cases.
It is the highest daily tally recorded in NSW since October 9, two days before lockdown lifted.
Among the cases is a traveller whose diagnosis forced 90 people at a Bondi hostel into isolation.
Police on Thursday afternoon cordoned off the Noah's Bondi Backpackers as NSW Health began testing all residents, who remain in isolation awaiting the results.
A spokesperson for the Sydney Local Health District on Thursday night confirmed one case had been detected.
"The case is now isolating. At this time, Omicron is not suspected," they said.
Health authorities are already battling to contain at least two large transmission events.
"NSW Health is concerned about the increased transmission taking place in venues such as pubs, clubs, and party settings," Dr Jeremy McAnulty said on Friday.
A trivia night at a Sydney pub sparked a new cluster of cases, with at least 44 patrons testing positive to the virus after attending the popular Oxford Tavern in Petersham on November 30.
Authorities are also concerned about 140 passengers who embarked on a Sydney Harbour cruise on Friday night which has so far resulted in five cases of the Omicron variant.
The number of people diagnosed with the Omicron variant of COVID-19 in NSW has now reached 42.
NSW Health has also issued alerts for the Golden Sheaf Hotel in Double Bay, the Albion Hotel in Parramatta, and Woody's Surf Shack Night Club in Byron Bay.
"The transmission in these types of settings is contributing to the increase in cases in NSW," Dr McAnulty said.
"We urge people not to attend any of these social functions or venues if you have any symptoms at all, even if mild."
But Premier Dominic Perrottet is urging "confidence, hope and optimism" ahead of the end of most restrictions next week.
From December 15 density limits will be scrapped, QR check-ins will only be required at high-risk venues, and masks will only have to be worn on public transport, at airports and on planes.
There are currently 158 COVID-19 cases admitted to hospital, with 24 people in intensive care, nine of whom require ventilation.
The government has also announced a boost to rebate relief available to eligible sole traders, not-for-profit organisations and small businesses across the state.
They will be able to access up to $2000 - up from $1500 - to offset some NSW and local government fees, including food and liquor licences, event fees and council rates.
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