The city is on track to exceed the previous annual record of 2194mm of rain by the weekend, reaching 2157.2mm on Thursday morning.
Sydney is 27mm away from the 1950 record.
"We have seen some pretty isolated falls above 50mm across NSW but the heaviest falls are along the coast," Bureau of Meteorology senior forecaster Jonathan How told ABC TV on Thursday.
The deluge will see rivers on and west of the Great Dividing Range hit by moderate to major flooding, affecting towns including Tamworth, Dubbo and Bathurst.
There is a severe weather warning for heavy rain and thunderstorms across inland NSW, with no reprieve in sight this week.
Much of the state will see showers and thunderstorms on Thursday afternoon, with the southwest set for severe storms, heavy rainfall, possible hail and damaging winds.
Sydney had its wettest July on record this year after only two weeks, passing the 1950 record of 336.1mm on the way to a total of 404mm.
March broke a 1942 record of 521.4mm when 554mm fell.
The SES' shift to the Australian Warning System last month is seeing its first test, with Advice and Watch and Act warnings issued around the state.
More than 40 warnings are current, with particular concerns about flooding in the communities of Forbes, Warren, Dubbo, Nyngan and Bathurst, SES assistant commander Sean Kearns says.
"We are also watching this weather system as it may move across metropolitan areas on the east coast," he told Nine's Today program.
Flood Recovery Minister Steph Cooke said flood threats across the state had more than 500 SES volunteers in the field.
"Our landscapes are entirely saturated, our dams are basically full and the river systems, those channels, are also full," she said.
"Any additional rain, even the smallest amount, vastly increases the risk of both riverine but particularly flash flooding."
A warning area for severe weather extends from the Queensland border in the north to Wilcannia in the state's central west.
Farmers are concerned the latest deluge will destroy another crop and graziers have been warned to to shelter their stock from the wind and rain.
"There is a risk of losses of lambs and sheep exposed to these conditions," the BOM warned.
Many NSW towns are dealing with renewed flooding, including the town of Warren, where major flooding is occurring again on the Macquarie River.
"It hasn't been hammering with rain, but we have had such a lot of rain consistently, basically since Christmas, that it just doesn't have a chance to dry out," Macquarie Caravan Park owner Carolyn Monkley told AAP.
"Rainfall here is totally different to rainfall on the coast. A couple of inches out here makes it very very ... soggy."
Other towns of concern include Condobolin, Nyngan, Cobar, Bourke, Wanaaring and Brewarrina.
Flood warnings are current across inland catchments including the Namoi, Macquarie, Bogan, Lachlan, Murrumbidgee, Murray, Edward, Culgoa, Birrie, Bokhara, Warrego, Paroo, Barwon, Darling, Macintyre and Snowy rivers.
Minor flooding is predicted on Thursday in western Sydney's Hawkesbury-Nepean region.
Coastal catchments including the Hunter, Hawkesbury and Colo rivers, and Wollombi Brook, are being monitored with rises expected.
The federal government has announced disaster assistance will be extended to 27 local government areas in inland NSW.
The funding can help people whose homes or properties have been damaged, help councils with restoring assets, or assist primary producers and small business owners.
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