The health authorities' decision came as no further transmissions were detected in relation to the two locally acquired cases in state capital Sydney's eastern suburbs, reports Xinhua news agency.
From Monday, the 20-person maximum for guests at private homes would be lifted.
Leisure activities at indoor venues such as standing-up drinking, group singing and dancing at nightclubs would be allowed.
Masks are no longer compulsory on public transport in greater city but are still strongly encouraged in public settings.
"As these two locally acquired cases have shown, COVID-19 may re-emerge in the community at any time. It is important that we all continue to take practical measures to stay Covid-safe," NSW Health said in a statement on Monday.
The temporary measures were introduced after a couple in Sydney's eastern suburbs tested positive in early May.
It hasn't been identified how the virus was passed on to them.
Meanwhile, the state administered 44,283 vaccines during the week ending Sunday, including 18,345 at the vaccination centre in Sydney Olympic Park which was open on May 10.
More than 900,000 people have been vaccinated so far, more than any other state in Australia.
"The vaccine rollout is key if we want to open up our borders and live a normal life, that is why we are working hard to rollout the vaccine as quickly and as safely as possible," NSW Premier Gladys Berejiklian told reporters here.
"I'm encouraging everyone in NSW aged 40-49 to register their interest to receive the Pfizer vaccine as soon as possible," she said.