The Bureau of Meteorology forecast areas around Sydney and the Newcastle region could get 10 to 20 millimetres on Sunday, between 20 and 40 millimetres in the Illawarra.
Residents were also being warned of hazardous surf conditions in Byron Coast, Coffs Coast, Macquarie Coast, Hunter Coast, Sydney Coast, Illawarra Coast and Batemans Coast.
Beach conditions in these areas could be dangerous and people should stay well away from the surf and surf-exposed areas, the bureau warned.
The big swell is being caused by a low-pressure system close to New Zealand and a high pressure over southeastern Australia.
The rain is forecast to move away from coastal areas on Monday, but it could return as early as Wednesday.
The severe weather warning came as thousands of NSW residents returned home on Saturday to begin the long journey of recovery after the latest flooding event.
On Sunday, the Hawkesbury river finally fell below flood level and more people returned home.
For Joanne Kendall and her husband Chris it hasn’t been an easy task.
Mr Kendall has been battling leukaemia and is now in remission but has been on the tools trying to clean up.
The federal government expanded the flood disaster payments to include eight more local government areas which were devastated by floodwaters.
Residents in Cumberland, Mid Coast, Muswellbrook, Nambucca, Newcastle, Port Stephens, Randwick and Warren are now eligible for the payments.
Premier Dominic Perrottet said on Saturday it would take a “major effort” to repair damage to flood-hit communities.
“I had the opportunity this morning with (Emergency Services Minister Steph Cooke) to fly above Maitland and Singleton and see the extent of the damage from above,” he said yesterday.
“And the enormity of the challenge in front of us, not just for local communities but governments, to make sure we get our communities back on track was not lost on me.”