NSW has recorded 25 consecutive days without a local COVID-19 case - three days short of the mark of eliminating the virus in the community.
The milestone comes as the state is poised to ease restrictions across Greater Sydney.
Only three cases were diagnosed in hotel quarantine from more than 16,000 tests across the state on Wednesday.
Meanwhile, the hospitality sector is gearing up to welcome twice as many customers as the state reverts back to the two-square-metre rule for indoor venues and outdoor events.
Masks will no longer be required in hairdressers or beauty salons from Friday but will remain mandatory on public transport, in taxis and Ubers.
"Hospitality workers, people attending places of worship, won't need to mandatorily wear a mask, but we do ... strongly recommend that especially in an indoor setting," Premier Gladys Berejiklian said when announcing the changes on Wednesday.
Gyms will maintain the four-square-metre rule, while caps on weddings and funerals remain at 300.
Only 20 guests will be allowed to dance at weddings and singing in public remains capped to five people.
Meanwhile, contact tracers are still hunting for the source of an infection in a returned traveller who had inexplicably tested positive two days after completing the required 14 days of hotel quarantine.
NSW Health is investigating the possibility it is an old infection from overseas, after genomic testing indicated it was very unlikely the person contracted the virus in hotel quarantine.
Health officials are also contacting people who were at the Holiday Inn at Melbourne Airport between January 27 and February 9, after more cases were linked to the quarantine hotel which has since been closed.
Anyone at the hotel in this period must get tested and isolate for 14 days regardless of the result.