NSW reported 18 new COVID-19 cases on Sunday, taking the number of active cases to 99.
Among the new infections were 13 cases that were locally acquired, which prompted a warning from NSW Health Deputy Chief Health officer Jeremy McAnulty to "take extra care".
"It wouldn't take much for us to be in Melbourne's situation and we need everyone's assistance," he said.
"Everyone has got a role to play. Don't be complacent."
Mr McAnulty said transmission in restaurants and hotels, gyms and social gatherings was of "particular concern", while urging people to avoid social gatherings and non-essential local travel.
International arrivals in Sydney will be limited to 350 people a day under tighter COVID-19 restrictions to ensure returned travellers don't overwhelm the health system.
Announcing the decision on Sunday, Premier Gladys Berejiklian said the step was necessary to make sure the state stays in a strong position to prevent the spread of coronavirus.
"Our number one priority is the health and safety of the people of NSW, and this new cap will help us protect our state from COVID-19," Ms Berejiklian said in a statement.
"NSW is the gateway to Australia and it is important that passengers returning home do not overrun the capacity of NSW Health and hotel quarantine."
The total number of cases associated with the Crossroads Hotel cluster is 45, while one of the new locally acquired cases attended Holy Duck! restaurant in Chippendale on the evening of 10 July.
Another case visited the Anytime Fitness Gym in Merrylands on 14 July from 9pm to 10:30 pm.
Health workers outside the Crossroads Hotel in Sydney Source: AAP
NSW Health is directing anyone who attended Holy Duck! or the gym to immediately self-isolate for 14 days since they were there and get tested if they show symptoms.
The restaurant was closed last night and is being cleaned and all close contacts are being identified.
Five of the new cases were travellers returned from overseas and in hotel quarantine.
The new airport cap will apply from 12.01am on Monday under an agreement with the federal government.
It further reduces the current cap of 450 people introduced on 5 July.
Jobs Minister Stuart Ayres said Australians had been given plenty of time to return from overseas.
"It is incredibly important the volume of returning travellers does not undo the great work of the people of NSW," Mr Ayres said in a statement on Sunday.
"The people, businesses and industries of NSW can only operate in this 'new normal' if we effectively reduce the spread of COVID-19, and further limiting the cap on returning travellers will help ensure this."
As students prepare to return to school on Monday, Transport and Roads Minister Andrew Constance said the 3,300 extra services added to the state's public transport network in June will continue.
Mr Constance urged people to re-time their day and particularly avoid the early part of the morning peak.
"If you have the ability to walk, cycle or drive please take those options," he told reporters in Sydney on Sunday.
A new sanitisation station for taxis and rideshare vehicles has also been fast-tracked in Sydney's southwest, following the spike in cases in western Sydney.
Victorian Premier Daniel Andrews on Sunday announced face masks or face coverings will be mandatory for people who leave their homes for four legal reasons in metropolitan Melbourne and in the Mitchell Shire from 11.59pm on Wednesday.
Asked if he could see NSW getting to this point, Mr Constance said "hopefully not".
"I think the main message is that at this time we have health advice in NSW which isn't the same as Victoria's," he said.
"If everybody continues to practise good social distancing, good hygiene and makes sure that they follow the rules, then we will again continue to be guided by [NSW Chief Health Officer Dr] Kerry Chant and her team."
Meanwhile, the retail, fast-food and warehouse workers union is urging people to not visit the shops after being tested for coronavirus.
"If you are getting tested it is out of a concern you might have COVID," the SDA's NSW/ACT secretary Bernie Smith said in a statement on Sunday.
"Don't go to the shops after you are tested. Wait for your test results. Don't go until you know. Don't put the health of the workers in the store and other shoppers at risk."
Residents in metropolitan Melbourne are subject to stay-at-home orders and can only leave home for essential work, study, exercise or care responsibilities. People are also advised to wear masks in public.
People in Australia must stay at least 1.5 metres away from others. Check your state’s restrictions on gathering limits.
If you are experiencing cold or flu symptoms, stay home and arrange a test by calling your doctor or contact the Coronavirus Health Information Hotline on 1800 020 080.
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