Sydney Harbour's marine habitat will benefit from a $9.1 million restoration project to improve water quality and biodiversity for penguins, seals, seahorses and turtles.
The state government funding has been pledged to reverse the loss of marine habitats through urbanisation and industrial activity.
"By installing hundreds of living seawall panels and replanting seagrasses and kelp forests in at least nine locations, we'll be restoring critical habitat for marine life like the endangered White's seahorse, little penguins, green turtles and seals," Environment Minister James Griffin said.
Sydney Institute of Marine Science [SIMS] chair Peter Cochrane said the Beachwatch program showed water quality in the harbour had improved.
But two centuries of industrial activity have left toxic sludge in the sediment, especially north of the Sydney Harbour Bridge, he said.
"[Water quality is] clearly best near the Heads, and it progressively declines as you get further upstream because there is less exchange with the ocean," he said.
"On the other side of the Harbour Bridge, pretty much you've got the history of the last two centuries of industrial activity in Sydney — a lot of it is captured in the sediments there and so long as they remain undisturbed [it's] OK".
The project, called Seabirds to Seascapes, brings together three elements to restore marine ecosystems, support the future of little penguins, and help fur seals thrive.
The project will include a survey of fur seals to identify their preferred habitat, breeding grounds, diet and threats from human interaction.
After being hunted almost to extinction during the 1800s, seal numbers are growing, as evidenced by more sightings around the harbour and along the coast.
In addition, a census of little penguin numbers will help conserve the species in the face of climate change, along with the restoration of seagrass meadows and kelp where they thrive.
Living seawalls will be installed across nine locations in the harbour, where hundreds of kilometres of smooth harbour walls have made it difficult for organisms to take hold, Mr Cochrane said.
The addition of seawalls creates surface texture and microhabitats for organisms like shellfish, mussels and algae, which can regrow significantly in a year, he said.
White's seahorses, one of the species in decline because of habitat loss in their harbour home, are now benefiting from biodegradable crates or "seahorse hotels".
Pollution during the 1980s destroyed the seaweed known as crayweed all the way from Palm Beach to Cronulla, and it has not returned.
Crayweed provides food and homes for marine life, creating oxygen and capturing carbon in an underwater forest.
Crayweed and kelp forests have already been replanted by hand at various locations across Sydney and take hold successfully under the right conditions, Mr Cochrane said.
Independent for Sydney Alex Greenwich hailed the announcement as a win for the city's residents, who love and use the harbour extensively.
"Today is a great day for fish, seahorses, seals and penguins — we know all Sydney-siders want to see the harbour thrive and be clean," he said.
The government is calling on local communities, local government and citizen scientists to get involved in consultation about locations for seawalls and the integrated projects.
The project is being led by the NSW Department of Planning and Environment, in partnership with the Sydney Institute of Marine Science (SIMS), Taronga Conservation Society Australia and NSW National Parks and Wildlife Service.
