Graffiti including "Kill Israiel" (sic) was sprayed on buildings and footpaths in Woollahra, a Sydney suburb known for its Jewish community, in the early hours of Wednesday.
A car, believed to be stolen, which the perpetrators drove to the scene was set on fire on Magney Street.
Resources have been increased as officers follow all leads, Commissioner Karen Webb told reporters.
"What happened last night is disgusting and there's no place for hate of this nature in Sydney or anywhere in Australia," she said.
"We are taking police and dedicating them to the operation … so police will be out there, the community can expect to see officers that will come up and speak to people."
Commissioner Webb said residents of Jewish neighbourhoods across Sydney would see increased "high visibility" policing.
View this post on Instagram A post shared by Anthony Albanese (@albomp)
Premier Chris Minns also condemned the attack, saying it was a hate crime.
"A violent act of destruction, clearly anti-Semitic, designed to strike fear into the community that lives in this part of Sydney," he told reporters.
He said amending legislation to tighten laws for offenders was not off the table.
"Can we do more? I think the answer is yes and I'm not closing the door to changes to the law," he said.
The perpetrators, believed to be two males of slim build, aged between 15 and 20, wore face coverings and dark clothing.
The attack in Woollahra has been elevated by the prime minister to Australian Federal Police. (Mick Tsikas/AAP PHOTOS)
Prime Minister Anthony Albanese said it was an "anti-Semitic attack".
"This isn't an attack on a government, this is an attack on people because they happen to be Jewish," he told ABC radio.
"This is a hate crime, it's as simple as that."
Mr Albanese said the perpetrators committed "abhorrent criminal behaviour".
"This does not change anything that is occurring on the ground in the Middle East," he said.
"This is an attack against their fellow Australians."
Foreign Minister Penny Wong said acts of hate had no place in Australia and anti-Semitism was condemned wherever it occurred.
Targeting Australian Jewish communities with violence and vandalism is disgraceful and antisemitic.— Senator Penny Wong (@SenatorWong) We condemn and reject antisemitism wherever it occurs. Acts of hate have no place in Australia.Australian Jewish communities have a right to be and feel safe.December 10, 2024
"Australian Jewish communities have a right to be and feel safe," she said on social media.
The attack comes after the Adass Israel Synagogue at Ripponlea in Melbourne's southeast was set alight in a pre-dawn attack on Friday while a number of people were inside.
Australian Federal Police have set up a special operation in response to the "likely" act of terrorism, which will investigate threats, violence and hatred towards the Jewish community and parliamentarians.
It will also investigate Wednesday's attack, the second recent incident in Woollahra after buildings and vehicles were targeted in November.
Chris Minns says the attack was clearly an anti-Semitic hate crime. (Mick Tsikas/AAP PHOTOS)
A ute was set on fire, and multiple cars, a restaurant and other buildings were graffitied with anti-Israel messages.
Two men are in custody, charged over that attack.
Executive Council of Australian Jewry co-chief executive Alex Ryvchin said it was designed to terrorise Jewish Australians.
"The Jewish community again wakes to scenes of terror and devastation," he said.
"How long will this continue and with what horrors will it end?"
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