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From 1 June up to 50 patrons will be allowed in New South Wales pubs, restaurants, clubs and cafes.
Strict regulations will be enforced on hospitality businesses, and those that are non-compliant will face the possibility of being closed down once again.
The four square metre per person rule will still apply, and customers at venues must be seated to be served.
Shared food, drinks and cutlery will be off the table for the time being in order to maintain strict hygiene standards.
Premier Gladys Berejiklian says the announcement is a major step for the state.
"New South Wales will be taking an important, critical and big step from the first of June," Berejiklian said.
"But the regulations and rules we will be putting in place will be very strict to make sure safety is paramount.
"And we have a no regrets policy, firstly in keeping the community safe, making sure everything we do is to protect lives and save lives, but also in relation to making sure people aren't long term unemployed, and that we can bounce back from the devastating economic shock."
These lifted restrictions on pubs, cafes and restaurants will come into force on the same day that the state is easing restrictions on intrastate travel.
Deputy Premier John Barilaro says the eased restrictions will be welcomed not only by businesses in Sydney, but also by regional areas where hospitality companies are gearing up for the long weekend and an influx of intrastate travellers.
"Today's announcement will allow regional businesses and economies to embrace, with the opening up of travel, the opportunity for businesses right into the June long weekend to fill their registers," Barilaro said.
"We know this industry is so important, right across the state. More than a quarter of a million people are employed in the hospitality sector, and we know, with the losses that we've seen in employment, this is a sector that could quickly put jobs back into the economy, and that is why the New South Wales Government ... are taking a mighty big step to make sure that our venues can open to embrace the visitors to come to regional and rural New South Wales."
Related: Three more months under current conditions the limit for nearly half of restaurants
NSW is the first state to go to 50 patrons in a venue, and follows announcements from Victoria and South Australia where the patron limit is slowly rising.
South Australia today will allow up to 20 patrons in a venue - 10 seated inside and 10 seated outside - and restaurants and cafes will be allowed to serve alcohol. Pubs in the state will be permitted to reopen on 5 June, but guidelines regarding numbers of patrons are yet to be announced.
Victoria announced on 17 May that from 1 June pubs, cafes and restaurants will be permitted to reopen with a 20-customer limit.
The announcement comes as NSW reports three new cases of COVID-19 today, bringing the state's total to 3,084.
Victoria has reported 12 new cases today, and Queensland zero new cases, bringing the national total to 7,095.
In total, 6,481 people have recovered from the coronavirus, with eight new recoveries today.
There are currently 509 active cases of COVID-19 in Australia.
Updated at 1:15pm AEST on 22 May 2020.
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