Police have said the conditions on the roads are "horrendous" and some of the "worst seen".
Sydney Airport is suffering from huge delays with just one runway open this morning.
It is now back to a full service, but about 50 flights have already been cancelled or delayed.
One passenger said there was chaos with "everything on lockdown, no flights in or out".
Airport spokeswoman Cait Tynan told news.com.au that passengers should check with their airlines before they come to the airport. "The airlines are the ones that make decisions about delays," she said.
On terra firma, confused commuters say they are stuck on buses with roads flooded, walking into blacked out train stations and sitting behind the wheel as traffic backs up. All light rail services are cancelled due to flooding, as is the T3 Bankstown line between Sydenham and Campsie.
T1 North Shore Line passengers are advised to allow extra travel time and Town Hall station is experiencing access issues, after a partial roof collapse.
At least a dozen people have already had to be rescued by fire crews.
Flash flooding in suburban Redfern partly submerged cars and caused Woolworths' emergency floodgate to go up, shutting the store.
Julie, a Salvation Army worker, was caught in the flood as she parked her car and the waters suddenly rose up to a metre.
Forecasters had earlier warned heavily populated areas of New South Wales were set for a soaking today, with wild weather and torrential downpours predicted across the state.
Up to 100mm was expected to fall across Sydney, the Hunter and Illawarra, the Bureau of Meteorology said — well above the monthly average. In many places, that is on track to be exceeded.
At 8am Sydney CBD was on 97.6mm of rainfall, Olympic park 67.6mm, Nowra 74mm, Norah Head on the Central Coast 60mm and Bega 30mm. Although Wollongong, which was right in the firing line, has seen 24mm which was less than expected.
Some places could top 200mm as an intense low pressure area zeros in on the cities.
NSW Police's highway patrol chief Michael Corboy urged motorists to take care in the "horrendous" conditions.
"The conditions we are experiencing today are some of the worst I've ever seen, and I am appealing to everyone, motorists and pedestrians alike, to take care.
"Once again we are asking all road users to reconsider the need to be on the roads throughout what will be a severe rain event today."
Sydney rivers including the Hawkesbury, Nepean, Cooks and Georges are all on flood watch, while the State Emergency Service is preparing to mobilise thousands of volunteers.
NSW State Emergency Service Assistant Commissioner Scott Hanckel said parents should think about alternatives for the school drop-off and pick-up and advised businesses to expect workers to arrive late.
"It's a great day to work from home — if that's suitable," he told AAP. He warned drivers not drive into flood waters, with that being the overwhelming major cause of flood deaths.
Simon Lewis, NSW Severe Weather manager for the Bureau of Meteorology, said the "one good thing" about the system was that it would pass quickly.
"It will cross the coast and then move fairly rapidly offshore," Lewis predicted.
"We're not expecting a very long duration of heavy rain, but we are expecting to see quite intense falls sometime in the morning and persist through until the afternoon."
"Wild supercell thunderstorms"
While meteorologists have dramatically upped the rain forecast for New South Wales, "wild supercell thunderstorms" in Queensland could hit the south east of the state on Wednesday as central areas continue to wither under a heatwave stoking bushfires.
"A dangerous rain and wind event is on the way for NSW with Sydney and Wollongong in the firing line with heavy rain, followed by powerful winds as a low pressure system comes in," saidSky News Weatherchannel meteorologist Rob Sharpe said on Tuesday.
"It's going to be a vigorous system — short and sharp."
Watch out for winds
Sharpe told news.com.au the severe weather warning for damaging winds was also worth noting.
"The most significant feature of the winds is that they peak after most of the rainfall has arrived. This means that the ground will be soggy and a little bit looser making it easier for trees to come down," he said.
"This event is likely to lead to flooding, trees and powerlines down and therefore we'll also have power outages with the worst of the weather."
Queensland fires
Fire authorities are urging people to immediately evacuate several towns south of Gladstone in Queensland as a massive bushfire hurtles towards their communities.
Queensland Fire and Emergency Services (QFES) stepped up calls for residents living near the Deepwater fire, south of Agnes Water, to evacuate by issuing an emergency warning early on Wednesday morning after many ignored pleas to leave overnight.
QFES Assistant Commissioner Gary McCormack said out of the 87 fires burning across the state, the Deepwater fire and another at Dalrymple, west of Mackay, were of the most concern.
The extremely large and intense fire at Deepwater is expected to impact Baffle Creek, Rules Beach and Oyster Creek this morning.
"We believe that we have around 60-70 per cent of that community evacuated," he told the Nine Network.
"We are just asking those residents that are choosing to stay in place, we are trying to advise them that their safest option is not to be there.
"We cannot guarantee that we will hold that fire under the conditions that we are currently experiencing. So their safest option is to not be with their property. Life preservation must be their highest priority at this stage."
Some residents refused to leave homes in the direct path of the inferno despite police banging on doors in Baffle Creek, Deepwater, Oyster Creek and Rules Beach on Tuesday night.
