A tornado warning is in place for Sydney's southern beaches, with winds up to 200km/h recorded at Kurnell, as dangerous thunderstorms are detected near Sydney Airport and Maroubra.
The Bureau of Meteorology has warned of very dangerous thunderstorms forecast to affect Sydney city, Sydney Olympic Park, the Sydney Harbour Bridge and waters off Bondi Beach, as well as Hornsby, Ryde and Terrey Hills.
Destructive winds, large hailstones and heavy rainfall that may lead to flash flooding are likely, the bureau said.
"Radar suggests possible tornado near Kurnell, and moving to north," it added in a statement.
It is soo coming - the storm. The bureau of meteorology is warning for "very dangerous storm & tornados & hail". No! pic.twitter.com/unWoSt2Uzj— Helene Lindholm (@shadesofnews) December 16, 2015
Wind gusts greater than 200km/h were reported at Kurnell at 10:30am.
A storm has already knocked out power to about 6000 homes north of Wollongong in suburbs including Bulli, Thirroul and Woonona.
Christopher Webb, a forecaster at the Bureau of Meteorology, said the storm had the potential to rage throughout the day.
"There is an upper level trough affecting us right along the central and southern parts of the coast," Mr Webb said.
"We're expecting that the warning will be extended more generally through the eastern parts of NSW as the day goes on.
"There is already a warning out for Sydney and in the very short term ... it looks like far southern parts of Sydney near the coast are at risk.
"As the morning progresses the risk becomes more general, all of Sydney will be at risk of severe storms by later in the morning."
Mr Webb said there would be destructive winds throughout Sydney throughout the day with temperatures of 25°C for the city and 28° for the west.
"The expectation is for a quite stormy day, but the storms may ease for Sydney later in the day."
He said there was a potential for hail throughout Sydney.
Endeavour Energy spokeswoman Janine Cullen said work was underway to restore power to thousands of homes north of Wollongong.
"We have sent out emergency crews and we are going to start patrolling the area to make safe and start the restoration process," Ms Cullen said.
The SES has advised that people should move their cars under cover or away from trees and secure or put away loose items around their house, yard and balcony.