There are 1344 people in the state's hospitals, 78 more than the previous record set on September 21 when NSW was in the grips of the Delta variant.
Tuesday's hospitalisation figure marks a rise by 140 on the previous day's figure.
Two more deaths were reported on Tuesday.
The new cases were from 83,376 tests processed in the 24 hours to 8pm on Monday, with the positivity rate at a record 27.7 per cent.
While ICU numbers are rising - 105 at the latest count - they are well short of the peak of 244 in September.
Intensive care admissions continue to be driven largely by the more severe Delta.
Since December 16, about 74 per cent of patients in NSW ICUs for whom the variant is known had Delta, a NSW Health spokesperson told AAP.
"Importantly, more than 62 per cent of those patients with the Delta variat were not vaccinated or had one dose of vaccine," the spokesman said on Tuesday.
With genomic sequencing impossible to undertake for all new cases, NSW Health is prioritising sequencing for patients in ICU in order to understand the impact of both the Delta and Omicron variants, the spokesman said.
Chief Health Officer Kerry Chant on Monday said authorities would be looking at "the whole picture", including hospitalisation figures, intensive care admissions, the positivity rate and case numbers.
The increasing hospitalisation numbers may mask the true picture of the severity of the virus, with a small NSW Health study finding that some patients counted in the numbers were actually admitted to hospital for completely different reasons, like childbirth.
NSW Health says with the spread of COVID-19 in the community, it's unsurprising that patients admitted for other injuries and illnesses will also be found to have the virus.
While hospital numbers have reached a record level, the proportion of cases needing hospitalisation is far lower than during the Delta wave.
NSW has recorded more than 5000 daily cases for 13 consecutive days.
Case numbers during Delta peaked at 1599 in early September.
Dr Chant said the case numbers and the positivity rate will change from day to day as tests from labs are processed.
While the outbreak is putting strain on the health system, she reassured NSW residents on Monday that it was there to help anybody who needs it.
But she urged people not to show up to emergency departments unnecessarily, such as people who are not unwell seeking a PCR test.
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