Rural Fire Service inspector Ben Shepherd said the fire was burning at Barrenjoey headland, at Palm beach.
He said the fire had cut an access trail to Barrenjoey lighthouse, and that an emergency alert would be issued to people in the area.
"We are about to send an emergency alert to people in that area to say `shelter at the lighthouse do not try to go back down the access trail itself'," he said shortly before 3pm (AEST).
Firefighters and aircraft are on scene, the RFS says.
Barrenjoey lighthouse sits at Sydney's most northern point and is about 1km from Palm Beach, according to National Parks' website.
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Meanwhille, firefighters are working to contain a bushfire on the NSW mid north coast that has been threatening properties.
A watch and act alert has been issued for the blaze, which is burning near Port Stephens at Italia Road, East Seaham.
Mr Shepherd said the fire crews had managed to defend properties in the area.
"We have see some property come under threat, but crews have been able to save a couple of homes in the area," he told Fairfax Radio Network.
He said the fire "was making its way further up the coast towards firegrounds at the Great Lakes and Taree".
An eye-witness to the Palm Beach fire, Scott Carpenter, said it looked like "an inferno" was engulfing the headland.
"I'm watching in horror," he told AAP via phone.
"The whole east side of the headland is in flames ... it's spreading very quickly."
He said helicopters were currently dropping water around historic buildings and the lighthouse.
It looked like the lighthouse was "likely to be isolated" by the blaze, he said.
On its website, the RFS said the immediate fire threat to properties in the area had eased.
Major fires are continuing to burn in the Taree and Great Lakes area on the mid north coast.
Total fire bans remain in place for Greater Sydney, Greater Hunter, North Coast, New England and Northern Slopes regions.
Hundreds of firefighters are out battling blazes as much of the state swelters through hot temperatures and gusty winds.
