The inscribed "Lest We Forget" on the stone outside Club Ryde in Sydney's north west was damaged to obscure the first word.
NSW Police appealed for public assistance on Friday, sharing a picture of the damaged stone, which they believe was vandalised sometime between 7am on Monday and 9.50am on Tuesday.
The memorial had earlier on Monday hosted a dawn service to mark ANZAC Day.
RSL NSW President Ray James condemned the vandalism.
He said nothing is more precious to the veteran community than memorials honouring those who gave their lives overseas.
"They have not just disrespected a memorial, they have blatantly disrespected every ANZAC and every person who has ever served in the Australian Defence Force, and the families who have never been able to bury a loved one," Mr James said.
"The disrespect shown to them on ANZAC Day really beggars belief."
The matter is now under police investigation.
Mr James said the incident serves as reminder of the importance of ensuring Australians remember the service and sacrifice of those in the armed forces.
Anyone with information or who may have witnessed suspicious activity in the area has been encouraged to contact Ryde police or Crime Stoppers.
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