NSW Health issued an alert on Thursday evening about the "On Repeat: Taylor Swift Red Party" at Sydney's Metro Theatre, with at least 600 people who arrived after 9pm on Friday deemed close contacts.
NSW Health said it is likely some of the new cases are the Omicron variant.
The revellers must be tested and self-isolate for seven days, and their household contacts also need to be tested and isolate until they receive a negative result.
It comes after a man was ordered to pay $10,000 after allegedly skipping self-isolation then going clubbing in Newcastle before testing positive.
NSW Police said the 20-year-old was directed to self-isolate at a Newcastle property from last Wednesday because he was a close contact of a positive case.
Instead, he attended a licensed premises on Wharf Road that night, and went to another person's house on Saturday.
More than 200 people acquired the virus at a Wednesday night party at the Argyle House nightclub on Wharf Road.
Health authorities have ordered the cancellation of a Newcastle music festival as the regional city becomes the epicentre of the Omicron-fuelled outbreak in NSW.
The Lunar Electric music festival was due to take place in Newcastle on Saturday, boasting The Veronicas, Pendulum and Darude on its lineup.
But the government cancelled the event under a public health order on Thursday afternoon.
"NSW Health considered that the ongoing spread of COVID-19 in the Newcastle area ... presents too great a risk for the festival to take place this weekend," the agency said in a statement.
The Hunter is responsible for 633 of the record 1742 new cases in NSW in the 24 hours to 8pm on Wednesday.
The majority are the highly transmissible Omicron variant.
The cluster has been driven by super-spreading events at pubs and clubs.
Health authorities want the Newcastle community to seriously consider postponing social events until after Christmas to keep family gatherings safe.
An alert was issued on Wednesday night for another Newcastle pub.
Anyone who was at the Cambridge Hotel on Hunter Street between 6.30pm on Friday and 2.30am on Saturday must get tested and isolate for seven days.
The government on Thursday extended the vaccine mandate for health care workers, bringing it into line with Victoria, Queensland and Western Australia.
All health practitioners - including doctors, nurses, speech pathologists and naturopaths, and support staff - working in public and private settings must be double-dosed by January 31.
The mandate previously applied only in public and private hospitals.
The number of cases reported on Thursday is a jump of 382 from the previous day's tally. The state has now recorded 122 cases of the Omicron variant.
The previous highest daily tally in NSW was recorded on September 11 when there were 1599 local cases, or 1603 if infections contracted overseas are included.
The record number of new cases were diagnosed from 143,938 tests in the 24 hours until 8pm on Wednesday.
There were no deaths recorded, whereas during the previous height of the pandemic there were a record 15 fatalities on September 29 and October 1.
Authorities are hoping the high vaccination rates - 93.3 per cent of adults are fully jabbed - will keep the stress on the health system to a minimum.
Researchers from UNSW's Kirby Institute have concluded two vaccine doses have little to no effect on the transmissibility of the Omicron variant but protection against severe disease - particularly with a booster shot - remains.
There are 192 people in hospital (up from 166), 26 of them in ICU (up two).
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