The enormous fireworks display kicked off at 7:40pm (AEST).
Fireworks were launched from city rooftops, barges from Cockatoo Island to Fort Denison, the Harbour Bridge and, for the first time, the decks of RAN warships.
The Opera House became the canvas for a dazzling display of lighting projections.
The show drew mixed reactions.
Earlier, Britain's Prince Harry, in full military uniform, reviewed a global armada of warships in a day of pomp and ceremony watched by tens of thousands of people on Sydney Harbour.
Captain Wales, as he is known in the British military, was on his first official trip to Australia to take part in a nautical extravaganza marking the centenary of Australia's emergence as an independent sea power.
The prince, in a white tropical dress uniform of the British Army and a blue Army AirCorp beret, boarded Australian survey ship HMAS Leeuwin to review the fleet alongside the Queen's representative, Governor General Quentin Bryce, and Prime Minister Tony Abbott.
Ayesha Sweeney, 19, travelled 460 kilometres (287 miles) from the rural town of Albury to see the prince and she managed to catch a glimpse of him as he saluted officers at Sydney naval base Garden Island.
"His uniform was really cool, his salute was awesome," Sweeney said.
"He's a bit of a cutie, I think everyone has a crush in him -- all of the ladies were wooing and whistling when he came out."
Victoria McRae, 20, was towed out of the way by Water Police after she paddled a kayak too close and waved a flag saying "I love you Harry" with her mobile phone number on it.
"I just wanted to see Harry on the boat really," McRae told Australian Associated Press.
"He's an eligible bachelor, I thought I might be in with a chance."
The prince, 29, who has served in Afghanistan and is an Apache helicopter commander, is one of the most sought-after men in the world, although British newspaper reports suggest he is dating English aristocrat Cressida Bonas, 24.
Dressed in a white tropical dress uniform of the British Army and a blue Army AirCorp beret, the fourth in line to the throne had more than 100 onlookers waiting for a glimpse of him on the other side of the gate.
"He's very handsome, I remember when he was born," Sydney resident Megan Robertson said.
Ayesha Sweeney, 19, said she had travelled from Albury to see the Prince.
His uniform was really cool, his salute was awesome," Ms Sweeney.
"He's a bit of a cutie, I think everyone has a crush in him - all of the ladies were wooing and whistling when he came out."
The HMAS Leeuwin will take Prince Harry around the harbour to inspect navy ships, which are taking part in the International Fleet Review.
He greeted onlookers at Sydney Harbour in the afternoon.
In brilliant sunshine, the Leeuwin reviewed an armada of warships from 17 countries, along with as many Australian vessels, watched by huge crowds of onlookers cramming vantage points around the harbour and an estimated 5,000 spectator boats.
The flotilla is part of celebrations to commemorate 100 years since the Royal Australian Navy's fleet first entered the city's waters.
It was on October 4, 1913 that seven Australian warships, led by HMAS Australia, first steamed into Sydney to be met by a rapturous welcome, heralding the country's independent sea power and emergence as a modern nation.
Until then, the Australian colony had been watched over by British vessels.
The prince also held a meet-and-greet with the public, having changed into a suit, then attended an official function with Abbott at his Sydney residence Kirribilli House, on the harbour opposite the Opera House.
At the soiree he was set to meet two of Abbott's children, Bridget, 20, and Frances, 22, with the Sydney Daily Telegraph recently warning the prime minister in a headline: "Lock up your daughters Tony Abbott, Prince Harry is heading Down Under to party."
The prince is expected to remain at the house to watch the fireworks and light show before heading to Perth for a brief visit on Sunday.
Sydney is playing host to a week of maritime celebrations, including aircraft fly-pasts, helicopter display teams, marching bands and firework displays, with many of the visiting ships, from countries including Britain, Singapore, Japan and the United States, open to the public.
