In the last 24 hours, 85,000 tests were processed.
One case was recorded in hotel quarantine.
Premier Dominic Perrottet said high levels of vaccination in the state had enabled the state government to scrap hotel quarantine and home quarantine programs for those with two doses.
A negative PCR test will be required before travellers board their flights and a testing regime will be in place on arrival.
Vaccines will need to be recognised by the TGA.
Hotel quarantine will still be required for unvaccinated travellers, with arrivals capped at 210 people a week.
"For double vaccinated people around the world, Sydney, New South Wales is open for business," Premier Dominic Perrottet said.
NSW to scrap quarantine for fully vaccinated arrivals from 1 November
"I think people in New South Wales will be flying to Bali before Broome ... we need to rejoin the world."
"We can’t live here in a hermit kingdom. We’ve got to open up, and this decision today is a big one, but it is the right one to get NSW connected globally."
Tourism Minister Stuart Ayres confirmed fully vaccinated returning Australians would be prioritised.
"It is a huge pickup for our economy, and it is a really clear signal to Australians who have had to operate overseas in a constrained aviation market that we are removing those barriers and allowing you to come home," he told reporters.
The state government suggested tourists and foreign nationals would also be allowed to enter the state, with the federal government taking responsibility for checking vaccination status as part of the visa application process.
Source: AAP Image/Lukas Coch
Mr Perrottet there would be "no delineation between Australian citizens and other citizens of countries around the world."
"The focal point here is a delineation between vaccination status - [between] vaccinated and unvaccinated."
Mr Perrottet said the changes had been discussed with Prime Minister Scott Morrison.
Travel to regional NSW postponed until November
From Monday, home gathering limits will expand from 10 to 20 people, while outdoor gatherings will expand from 30 to 50 people.
Drinking at bars will be allowed again, with the cap on bookings removed from 1 November.
But Sydneysiders won't be allowed to travel to the regions until 1 November because of the risk posed to communities where COVID-19 vaccination rates lag behind the cities.
"If you look at the percentage of LGAs have reached that 80 per cent double-dose here in Sydney, that is where regional New South Wales will be on November 1,” Mr Perrottet said.
Cabinet met on Thursday night and opted to delay regional travel because only 36 per cent of regional local government areas have populations where 80 per cent are double vaccinated against COVID-19.
"I know that with this announcement today, it is going to be frustrating for many people," Deputy Premier Paul said.
"It is too early, and we know that if we wait another two weeks we will be in the same position is what Sydney is today."
The coalition government had promised unlimited travel in the state from the Monday after NSW reached its 80 per cent double vaccination milestone.
With 77.8 per cent of NSW residents aged over 16 now fully vaccinated, the state is likely to reach the 80 per cent threshold on the weekend.
Late on Thursday, NSW Health announced that from Friday, restrictions for people entering NSW from the ACT will be eased and people will no longer need to complete a declaration form upon entry to NSW or follow stay-at-home rules on arrival.
Queensland residents will also no longer have to complete a declaration form on arrival due to low rates of community transmission in that state.
Some 91.4 per cent of eligible NSW residents have had at least one COVID-19 jab.
Among children aged between 12 and 15, 72.11 per cent had received at least one dose by Wednesday, and 26.01 per cent are fully immunised.