The iconic venue was lit up in the blue and white of the Israeli flag on Monday night in solidarity with the Jewish community after Islamist group Hamas attacked Israeli towns on Saturday.
The group sent fighters across the border into Israel and fired thousands of rockets in an unprecedented attack on Saturday.
At least 900 people have reportedly been killed in Israel and more than 600 have been killed in Gaza.
Hamas militants have taken Israelis hostage, with Reuters reporting the movement, which controls Gaza in the Palestine territories, plans to execute captives if civilian houses are bombed.
Premier Chris Minns said while he supported the right to protest, the behaviour on Monday night was "completely abhorrent".
"(This is) against the tenets of our multicultural community and I completely deplore it," he told Seven's Sunrise.
"I don't know why this protest went ahead in any event after so much bloodshed in Israel."
The premier stood by his government's decision to light up the Opera House in solidarity with Israelis affected by the attack.
He compared it to a decision to light institutions in the colour of the Ukrainian flag after the Russian invasion.
Opposition Leader Mark Speakman said the protest should never have been approved and called on Police Minister Yasmin Catley to explain.
"It was disgraceful and deplorable that we're seeing scenes like that in Australia," he told 2GB.
"This was meant to be a chance for our Jewish community to have a peaceful vigil ... and instead it's allowed to be hijacked by a rowdy mob shouting anti-Semitic slogans, lighting flares and burning a flag."
Attorney-General Michael Daley said everybody needed to calm down and recommended people stay home for their safety.
"This sort of dividing into camps and barracking over what is a horrific situation in the Middle East is just not acceptable," he said.
"What everybody needs to do is to show restraint and respect, calm down and stop dividing into teams and competing with each other in various forums or on the street for supremacy."
Jewish father-of-two Mark Spiro, arrested by police near a Town Hall rally on Monday night, is considering his legal options.
The Sydney businessman told Sky News he was carrying a rolled up Israeli flag when he was arrested. He was later released without charge.
Mr Spiro said it was "shocking and confronting" to be arrested.
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