Premier Gladys Berejiklian and Water Minister Melinda Pavey on Thursday announced Sydney, the Blue Mountains and the Illawarra would be subject to level 2 water restrictions from December 10.

They are usually enforced when Greater Sydney's dam levels fall to 40 per cent but are being brought forward. The total storage is currently at 46 per cent.

"The amount of water we're losing every month is accelerating faster than it's been before," Ms Berejiklian told reporters.

"We're doing this because we're being cautious but also because there's no doubt the acceleration of depletion of water is more than we've had in the past.

"We feel by moving to level 2 now, we're able to pace ourselves and make sure we have plenty of supply."

Sydney Water's executive drought lead Catherine Port said Greater Sydney was experiencing one of the worst droughts on record - "certainly more severe than the millennium drought".

She said Sydney generally used 1.5 billion litres of water every day and dam inflows had been just 10 per cent of the usual amount.

"Although some of the coastal areas and inner-city may appear very green, don't think that the extreme drought conditions are not affecting Sydney too," Ms Port told AAP.

"We are very much seeing them start to affect the Sydney area."

Under the new restrictions, people will need to use a bucket or watering can to water gardens between approved times.

Cars can only be washed with a bucket or taken to a commercial car wash and the topping up of pools and spas will be limited to 15 minutes a day with a trigger nozzle.

Fines of $220 apply for residential breaches while businesses face a potential $550 penalty.

Labor supports bringing the restrictions forward but also wants the coalition to expand the capacity of Sydney's desalination plant which returned to operation in January.

"Sydneysiders are heeding the warnings and are doing their bit to save water but it is clear that it is not going to be enough," opposition water spokesman Clayton Barr said in a statement.

"The premier either has to commit to an expansion of the current facility today or investigate a new facility in the state."

Ms Berejiklian said they were considering expanding the plant.

Ms Port said the desalination plant supplied 15 per cent of Sydney's water and if it expanded that could rise to 30 per cent - or another 250 million litres of water every day.

"It's major infrastructure, it does take time to bring online, but of course given the severe and pressing drought conditions, we would be looking to deliver that as quickly as possible if a decision was made (to expand)," she said.

Ms Berejiklian said introducing level 2 restrictions in December would "prolong" the period before level 3 restrictions had to be considered.

Australian Associated Press