NSW Premier Dominic Perrottet said hospitals are operating "well within capacity", opening the door for those surgeries to resume in private hospitals and non-metropolitan public hospitals next week.
The decision to cancel elective surgery was made in the second week of January, as the number of daily COVID-19 cases reached more than 38,000.
A review into how hospitals were functioning had previously been slated for mid-February, but advice from NSW Health now says private, regional and rural public hospitals can return to up to 75 per cent of pre-pandemic activity on Monday.
Waiting times for elective surgery can stretch as long as seven weeks, with hospitals backlogged with bookings from previous cancellations over 2020.
Chief Health Officer Kerry Chant said it was pleasing to see hospitalisations and ICU admissions decrease, but the number of people on ventilators remained at a more constant level.
"A number of the patients have got longer length of stays in ICU when they are ventilated, but we will see that number come down as well," Dr Chant said.
The health system continues to be "working very hard", she said, including public and private hospitals, GPs, pharmacists and allied health professionals.
Dr Chant said there were reasons to approach 2022 with some optimism when asked about a possible spike of COVID-19 and flu cases in winter.
"We've got vaccines that are holding up well, we'll have further vaccines throughout the year, we've got antivirals, and we also know what tools we've got that … slow the spread.
"As immunity wanes, we may well see an uptick in cases – we may well need to revaccinate some people that are at risk of severe outcomes."
She said tools used in the pandemic like hand washing and mask wearing are also good interventions against the flu.
NSW recorded 10,698 new coronavirus cases and 31 deaths on Friday.
Of those who died, eight were in their 60s and 70s, 22 in their 80s and 90s and one person was over 100.
Hospitalisations fell to 2494 on Friday and ICU admissions remained at 160, with 75 on ventilators, an increase of seven on the previous day.