Australia's largest city usually puts on a dazzling display of pyrotechnics over the glittering harbour but this year's celebrations have been overshadowed by calls to cancel the fireworks as devastating bushfires rage across the country.
Toxic smoke haze has shrouded Sydney for weeks and a petition to cancel the event out of respect for fire victims attracted more than 280,000 signatures.
Fireworks displays were scrapped in Australia's capital, Canberra, and Sydney's western suburbs due to elevated fire danger and extreme weather conditions but fire authorities said it was safe to go ahead over the water.
More than 100,000 fireworks were scheduled to light up the skyline for 12 minutes to about one million spectators crowding foreshores and parks.
Critics wanted Sydney to use the $6.5 million ($4.5 million) spent on the display to fight bush-fires ringing the city, but officials say the event is worth 130 million Australian dollars to the economy and cancelling it would not help those impacted by the fires.
"We have committed to harnessing the enormous power of the event to raise more money for drought — and fire — affected communities," Sydney Lord Mayor Clover Moore said.
Crowds have been warned to take care as strong winds gusted in the harbour, forcing the cancellation of a boat display that would have blasted water into the sky — just hours before the fireworks were due to start.
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