Authorities said two elderly men died and 19 homes had been destroyed by wildfires during the past two days.
Some 79 fires burned across New South Wales state, blackening about 173,000 acres of forest and scrubland, the worst on the outskirts of Sydney.
The sky over the city of 4 million people was shrouded in smoke from fires raging on its north, northwest and southwest fringes. The flames stabbed into the suburbs in two areas along tracts of urban parklands.
Some major roads and rail routes into and around the city were closed.
Authorities described the blazes as the worst wildfire crisis in 30 years.
``The reason the fires are behaving so badly, erratically, unpredictably, is entirely due to the deficiency of moisture in the vegetation which in turn is solely due to the drought,'' said Rural Fire Service chief Phil Koperberg.
Firefighters have been warning for months that Sydney faced a devastating wildfire season over the hot Southern Hemisphere summer. Almost 90 percent of Australia has been declared drought-stricken, and some parts of the country are facing their driest conditions in a century.
More than 4,500 firefighters working 12-hour shifts beat back flames with the help of water-bombing aircraft. In suburban areas of Sydney, residents _ coughing and with tears streaming from their eyes _ used garden hoses, buckets, blankets and even towels to protect their homes.
One resident, Bob Crowley, watched in horror as flames swept over his house in Dural, northwest of Sydney, but left it virtually unscathed.
``All of a sudden the wind blew a big firestorm over the top. Everyone was running for their lives. We are just lucky the wind changed and saved us,'' he said. ``My skin was burning as I was running. I have never been scared in my life like that.''
Police suspect some fires were deliberately started.
An 18-year-old appeared in a court on arson charges on Friday and was remanded in custody until Jan. 31. He faces a maximum 14-year prison sentence if convicted. Other fires might have been started by cigarette butts tossed out of cars, fire officials said.
Television images showed sheets of fire leaping from tree-to-tree in the dense forests that ring Sydney. Oil-rich eucalyptus trees burst into flames.
The wildfires also caused havoc in the Blue Mountains west of Sydney, where blazes last Christmas devastated dozens of homes.
On Friday, police recovered the body of an 81-year-old man in a destroyed trailer home northwest of Sydney.
A 73-year-old man died of a heart attack on Wednesday after he tried to round up and save a herd of horses.
Hot, dry Outback winds picked up Friday afternoon and so did the fires' ferocity. The winds were expected to subside over the weekend, then pick up to 50 mph on Monday.
``We've got 72 hours to do what is impossible to do in 72 hours and that's extinguish all that fire,'' Koperberg said.
