Police broke up a series of neo-Nazi demonstrations on Sydney's north shore over the Australia Day weekend and thwarted plans for about 60 men to rally in the city centre.
Premier Chris Minns on Monday credited police for a great job but flagged the law might need to be strengthened.
The Nazi salute is explicitly banned in some states, but the law is less clear in NSW.
A test case before the courts involving football fans is set to determine in April whether a law against Nazi symbolism extends to public salutes.
But should the prosecution case fail, the premier promised an explicit ban.
"I'll be looking at that case really closely," he told reporters on Monday.
"If that legal barrier isn't cleared, we will move legislation to outlaw racist Nazi ideology and white power symbols."
Mr Minns also ridiculed neo-Nazis who gathered in Sydney over the weekend as "morons" and "idiots" espousing a demented ideology, warning those who travelled from interstate that the police could unmask people.
There are concerns police don't have enough legal powers against Nazis in public. (Brent Lewin/AAP PHOTOS)
Opposition Leader Mark Speakman said the images of neo-Nazis on Sydney's streets were "incredibly confronting" and had no place in modern Australia.
But the former attorney-general was unsure if police powers for unmasking, used for driving and serious offences, extended to these gatherings.
"It's not clear here what the powers of the police are," he told Sydney radio 2GB.
"But I think in principle, if someone turns up in public dressed in a balaclava, they're looking for trouble and police should have the power to rip them off."
It comes as the federal government looks to introduce new religious discrimination laws in coming months.
The proposal would seek to protect people from hate speech and vilification based on their faith.
Laws banning people from performing the Nazi salute in public or displaying symbols such as the swastika came into effect earlier in January.
The federal laws banning Nazi salutes came after similar state prohibition on the gesture in Tasmania and Victoria.
Passage of the legislation came following a rise in reports of anti-Semitism and the use of Nazi symbols by far-right groups.
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