"To see the crowd here in Martin Place, there was not a spot left open to be standing or sitting," President of RSL NSW Ray James told AAP.
It was a great feeling to watch people stay and pay their respects, even as patchy rain fell across the ceremony, he said.
"There's not one person in Australia that doesn't know someone, or is a relative of someone who has worn the uniform," Mr James said.
He said the size of the crowd, particularly younger people, showed the Anzac spirit was alive and well in Australia.
Standing with Mr James beside the Cenotaph was Gary Charlesworth, who served for six years before becoming a member of the NSW Police Force.
Mr Charlesworth received military training from the RSL president and said he was moved to see the service filled with families.
"The last two years have been a little bit haphazard, but you could feel that there were tears shed in the crowd," he said
"It's good to see people feeling that community the Anzac spirit brings."
David Young, a serving member of the Australian Navy, told AAP he was back at the service to educate his children about his military experience.
"Being in the Navy for 24 years, this is a chance to remind the kids of the history behind why I serve," he said.
"I've lost guys that I've served with and it helps to explain what I've done in the history of my career."
At Martin Place with his two children, he said now they were a bit older, he'd brought them for the first time.
Cameron Barnett, 24, from the Scouts told AAP many former members of the youth group ended up going to war, and Anzac Day was of major significance to the organisation.
He said the Scouts were heavily involved in Anzac Day commemorations, and throughout the morning, many were holding umbrellas for elderly veterans in the service.
NSW Premier Dominic Perrottet arrived with one of his daughters under an umbrella, as rain fell over Martin Place during commemorations.
The premier read the poem Salute, by Sydney Napier, written during the First World War, and published in 1937.
NSW Opposition Leader Chris Minns also attended, saying in a statement following the ceremony he was calling for the establishment of a memorial to honour all those who served in campaigns in Iraq and Afghanistan.
Also at the service was Senator Hollie Hughes representing Prime Minister Scott Morrison, and Member for Sydney Tanya Plibersek, representing the Opposition Leader Anthony Albanese.
Delivering the address in Sydney, Major General Matthew Pearse said it was a day to give thanks for all veterans "for their service, their sacrifice and their resilience".
"They're filled with stories of ordinary Australians who pulled together despite adversity to support their mates and put their lives on the line to defend our national interests and secure a brighter future," the commander of Forces Command said.
Dawn services also took place across Greater Sydney in Parramatta, Penrith, Castle Hill, Southern Liverpool, Granville, Bondi, Coogee and the Central Coast.
Commemorations are also taking place in regional NSW, including at the Wagga Wagga War Cemetery, the Nowra War Cemetery, and the Deniliquin War Cemetery.
The Royal Australian Air Force will also conduct flyover displays in more than 50 locations across NSW, including in Sydney, Newcastle, Wyong, Cessnock, Ourimbah, Woodburn, Grafton and Bega.
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