Jamiroquai singer Jay Kay, with a beer in hand, performed from a double decker bus to a huge crowd in the city's Hyde Park on the first night of the three-week arts event, shortly after DJ Norman Jay performed his Good Times Sound System set.
According to The Daily Telegraph, singer Megan Washington, award-winning musician Geoffrey Gurrumul Yunupingu and French music star Manu Chao warmed up the crowds in The Domain, while a roving Trocadero Nights dance party paraded down Elizabeth Street.
Stars such as director Sam Strong, Underbelly actress Cheree Cassidy, Spirited's Claudia Karvan and Rake actor Richard Roxburgh were spotted at the afterparty at Hyde Park Barracks.
Sun Chasers took to the stage in St James Garden, Caspar Babypants performed in the Music Garden and The Eddie Bronson Trio entertained fans at the Art Gallery of NSW.
Washington, together with musicians including PJ Harvey and Beth Orton, is scheduled to reveal a private collection of poems, photographs, art and music during this year's Sydney Festival.
Last week, it was reported that an extra 360 police officers were being ordered to take over central Sydney to help control the 200,000-strong crowds. Superintendent Craig Sheridan said: "We thought the [New Year's Eve] crowd should be congratulated for their behaviour and we want to go into [the] festival's first night with the same type of crowds."