Police officers with long-range firearms will patrol high-profile public buildings, places of worship and protests around Sydney, with a 24-hour operations centre to back them up.
The permanent unit of 250 officers will be equipped with a fleet of modified rapid-response vehicles, while the operations centre will provide intelligence and real-time co-ordination and surge management.
The decision comes two months after the Bondi terror attack, during which 15 people were killed by gunmen targeting Hanukkah celebrations.
NSW Premier Chris Minns said installing a permanent structure for Operation Shelter, instead of rotating officers from various commands, would ensure police were always ready.
"The sad reality is that the Bondi terror attack is only weeks old," he told reporters on Wednesday.
"But we need to be in a situation six months, two years, five years from that event and still have the public be in a safe situation."
The premier highlighted a loss of innocence for Sydney and the nation, saying the significant investment was necessary to ensure people felt safe.
But he brushed off concerns about Operation Shelter's methodology in collating anti-Semitic incidents before the Bondi attacks.
Latest figures from Operation Shelter, set up in October 2023, recorded 815 incidents considered anti-Semitic or Islamophobic in nature as well as other incidents that fall into neither category, with more than 230 people arrested.
The accuracy and veracity of these numbers have been questioned after it was revealed nearly 370 anti-Semitic incidents were incorrectly categorised dozens of times.
"The evidence is in ... segments of our community feel unsafe, it's usually because of their faith," Mr Minns said.
NSW Police Commissioner Mal Lanyon spruiked the unit's ability to be nimble while not revealing how much it would cost.
"Whilst as a police force, we know we can't be everywhere - we can be anywhere," he said.
"It's really important for people who have an intent to do harm, to understand that the NSW Police Force will be present."
Assistant Multicultural Affairs Minister Julian Hill used a speech at the McKell Institute in Sydney on Wednesday to argue progressive patriotism was the solution as extreme right and left-wing ideologies threaten community harmony.
In the post-Bondi terror attack era, he said Australia was not immune to "forces of hatred" that could spiral out of control if left unchecked.
Such hatred was stoked by the far-right, Mr Hill said, calling out One Nation figures and conservative Liberals Andrew Hastie and Jacinta Nampijinpa Price, who have campaigned against so-called "mass migration".
"We cannot be complacent in the face of failure and rightward drift of the clown show that is the coalition, leaving a vacuum for the re-emergence of Pauline Hanson's One Nation grievance machine," he said.
A string of recent opinion polls have revealed a spike in backing for One Nation, passing the coalition for primary support and edging towards Labor.
Mr Hill accepted there were different views about Australia Day, but he urged progressives to embrace it.
"Many of us like to don Aussie garb and people don't want to be sneered at for loving Australia," he said.
"Why on earth would we cede our flag, our national day and institutions as propaganda for extremists and the hard right?"
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