Portraits of four key historical Gadigal people of the Eora nation, including female leader Barangaroo and cultural mentor Patyegarang, were projected onto the Sydney Opera House sails as the sun rose on Friday.
"Many may know their names, but today is about shining a light on the role they played in modern Australian history," Aboriginal digital artist Brett Leavy said.
"The four statuesque images bring to life key Aboriginal figures who were not regularly recorded in Australian history books."
Portraits of four key historical Gadigal people were projected onto the Sydney Opera House. (Dan Himbrechts/AAP PHOTOS)
Eora culture was also marked by the long-running WugulOra ceremony, mixing music, dance, language, storytelling and ceremony along with a bilingual rendition of the Australian national anthem.
Premier Chris Minns told the crowd of hundreds the arrival of settlers in 1788 was not the first page of a news story written on a blank page, but a chapter in a 65,000-year story.
"It's only natural that Aboriginal people will mark today in their own personal ways," he said.
"Some with quiet thought and reflection. Others with their mob, their friends, family and community.
"Others will make their voices heard ... as is their right. But as this event shows, there's also room for celebration today."
After acknowledging the oldest Australians, the premier met the newest ones - in Penrith at one of dozens of citizenship ceremonies across the state.
It's natural that Aboriginal people will mark the day in their own personal ways, the premier said. (Brent Lewin/AAP PHOTOS)
Elsewhere, the RAAF's elite aerobatic display team - the Roulettes - returned to the skies above Sydney Harbour for their first Australia Day show in more than a decade.
Spectators also lined the shore to watch the harbour's newest public ferries battle it out for line honours in the annual Ferrython race.
Performances from Dami Im, Casey Donovan and William Barton were to round out celebrations at the Opera House on Friday evening before fireworks light up the night sky.
The plans of train passengers in the city's north were interrupted by a police operation at North Sydney focused on 40 balaclava-clad men, several with Australian flags.
Meanwhile, thousands attended a major Invasion Day demonstration at Belmore Park.
Paul Silva, the nephew of David Dungay Jr who died in custody in 2015, said it was important for white Australia to understand "why blackfellas want this day gone", citing the long history of state-sanctioned massacres of Aboriginal and Torres Strait Islander people since 1788.
"We don't need a day that inflicts so much trauma on us," he told the crowd.
Many across NSW marked the national day in the water as a heatwave swept the state. (Dan Himbrechts/AAP PHOTOS)
Many across NSW marked the national day with sand under feet and water at their chest as a heatwave swept the state.
The mercury in Sydney's CBD passed 38C by 2pm before a southerly change plunged temperatures by 12C to a cooler 26C by 5.30pm.
At the epicentre of the heatwave, the state's Hunter and mid north coast, Gloucester missed a forecast 45C but joined Newcastle, Maitland and Taree in topping 40C.
27°C