Video posted on social media show the tornado moving through neighbourhoods to the shock of residents, ripping out powerlines.
NSW SES Superintendent Scott Dodson told the Nine Network strike teams had been set up to clear roads blocked by trees and debris.
“There’s a lot of damage up in the Armidale are overnight. Fire and rescue are working with SES up there,” Mr Dodson said.
“We just want to make sure that everything is safe and help get the residents up there back to normal.”
Hours earlier, severe thunderstorms struck Sydney’s south and west with heavy rain and large hailstones inundating the city.
Hailstones larger than five centimetres were reported in the vast area between Sydney and Cowra in the central west.
Among the damage, the ceiling of a Westfield shopping centre at Mount Druitt collapsed during the deluge.
Late in the afternoon, the Bureau of Meteorology issued a tornado warning for Greater Sydney as the “really dangerous” storm approached the coast.
NSW SES Superintendent Scott Dodson told the Nine Network there were 212 calls for help on Thursday in Sydney and the lower Blue Mountains.
“We had over 5000 people evacuated but fortunately zero injuries, which is a great result.”
Severe storms also swept over areas of Victoria, with heavy hail reported in Pira in the state’s northeast, resembling a coating of snow.
Heavy hailstorms also left Melbourne’s North West blanketed in white.
Residents were left stunned by sudden turn in weather with some building makeshift "snow-men" out of the large hailstones.
The wild weather continued this morning, with a severe thunderstorm warning for damaging winds, large hailstones and heavy rainfall issued for South East Queensland residents.
Benobble near Mount Tamborine recorded more than 50mm of rain in the 30 minutes to 6.05 am (AEST).