Sydney's Warragamba Dam is full and spilling over due to the heavy rain in the catchment over the weekend.
The Sydney Catchment Authority says the spill gates automatically opened this morning at about 6:00am (AEDT) to release some of the water.
Spokesman Ross Young says a relatively small amount of water is being released.
"It's probably about two days of consumption overall," he said.
"Virtually all of the dams if they're not spilling, they're very, very close to spilling, and this has got to be good news compared to other parts of Australia which are experiencing drought."
Hydrologist Keith Dwyer from the Bureau of Meteorology says the Nepean and Hawkesbury Rivers will be affected, with minor flooding predicted in the Penrith and North Richmond areas.
"We believe there will be minimal danger because it won't get higher than minor flood level," he said.
The Warragamba Dam reached capacity and started spilling for the first time in 14 years last March.
© ABC 2013
00:28 EDT North Queensland is keeping a close watch on Ex-Tropical Cyclone Gillian and Cyclone Hadi.