The disruptions follow a protracted and ongoing dispute between the NSW government and the state's rail union, resulting in widespread staff absences on Friday.
The Labor government says many train drivers didn't turn up to work, but the union claims they've been locked out.
"Our teams are working hard to recover as much of the timetable as possible, however, due to a high level of staff absences, we are looking at ongoing, substantial, and worsening disruption," Transport for NSW said in a statement.
In an overnight update to members, the Rail, Tram and Bus Union said industrial action to operate trains at slow speeds would begin on Friday morning, alongside lockout notices issued under the Fair Work Act, after negotiations fell over "at the final hurdle".
"You can simply not go to work ...," it said, adding that if a member didn't turn up they would not be paid.
"If you are found to have been enforcing the go-slow, you may lose your full shift of pay."
Transport Minister John Graham said the network was in the midst of a major disruption.
"We've had more than 350 services cancelled this morning and that is having a big impact across the network," he told Sydney radio 2GB on Friday.
"We're obviously, though, not paying people to take industrial action."
But union secretary Toby Warnes said workers hadn't been told to do anything by the union and were making their own plans and choices in response to the lockout notices.
"The employer can respond to employee industrial action, and that response is essentially that they can refuse to accept the performance of any work from the employee, and that's what's happened," he told 2GB.
Negotiations between the government and the union broke down over a $4500 payment to workers on the commencement of a new work agreement, if one eventuated.
The government said it was a last-minute ask in negotiations, while the union said it was a clause in the previous agreement which the government assumed it could remove without asking.
It had not previously been discussed in the months-long negotiations, both said.
In a notice to members following the approval of an enterprise agreement in 2023, the union called it a "one-off" payment.
Mr Graham said the government "simply can't afford to" pay.
the rail network, which carries about a million people on an average day, has faced disruption throughout the negotiations, which have dragged on for months.
"I'm 100 per cent sure Sydney's over it," Mr Warnes said.
"We're over it, I think the government's over it too."
The government is considering more legal action.
While services are disrupted and delayed on all services, trains are not running at all on the South Coast line.
