NSW Premier Gladys Berejiklian has announced an easing of the state's border permit system with Victoria, re-establishing a 50km border buffer zone.
The zone will be expanded from 2.5km to 50km on Friday to help border communities go about their lives as normal.
A reduction in new COVID-19 cases in Victoria had made it possible to ease restrictions, Ms Berejiklian said on Tuesday in Albury.
"Pandemics are far from perfection when it comes to having to make decisions quickly and can I tell you, hand on heart, that one of the most difficult decisions I've made personally and the government has made during this pandemic has been closing the NSW-Victorian border. It was a decision of last resort," Ms Berejiklian told reporters.
"One of the main reasons we didn't move earlier was because we knew the disruption and angst it would cause people in the border communities.
"You don't see yourselves as a state border, as two communities, but one."
Restrictions have been in place on the NSW-Victoria border - and its 55 crossings - since early July.
The new border permit will allow residents within 50km of the NSW-Victoria border to cross the Murray to obtain goods and services, perform care or attend work or school.
But the Australian Industry Group in a statement on Tuesday said the 50km border bubble didn't go far enough and should be extended to all of regional Victoria.
"Being able to travel 50km will help some in the community whose lives and businesses have been so badly disrupted, but the border closure itself is not supported by the facts," Ai Group NSW head Mark Goodsell said.
Ms Berejiklian admitted she regretted the speed at which border closures were established and subsequently tightened, but said she felt there was no alternative.
"I never want to look back at a point in time where the premier of NSW has ignored health advice, things in Victoria changed very quickly," Ms Berejiklian said.
"If I was in your shoes and something changed overnight which was going to impact my life, I would feel let down and disheartened and concerned. So I completely empathise."
Victorian Health Minister Jenny Mikakos welcomed NSW's changes to the permit system, while Premier Dan Andrews said it would come as good news to border communities.
"We all want to be in a position (at) summer time, come Christmas time, (where) we have freedom of movement," Mr Andrews told reporters.
NSW Nationals leader John Barilaro has been vigorously agitating for border restrictions to be relaxed after meeting with stakeholders in Albury-Wodonga last week.
On Monday, he also called for a national code to allow agricultural workers to cross state borders without permits, and NSW Agriculture Minister Adam Marshall will take part in a national agricultural ministers' meeting on Tuesday to seek consensus on the code.
Ms Berejiklian said additional advice on the code would also be provided in Friday's national cabinet meeting.
NSW residents in Victoria who are outside the NSW-Victoria border buffer zone and wish to return home are currently required to fly into Sydney Airport and spend 14 days in hotel quarantine.