Congregations up to 300 will be allowed at places of worship in NSW from Friday after religious leaders complained about "inconsistent" restrictions.
Staffing at gyms will also be relaxed, with a COVID safety marshal only required when more than 20 people are working out.
"This is a great announcement for the body and the soul, so whatever you worship, there's something for you in this one," Treasurer Dominic Perrottet told reporters on Wednesday.
Hillsong pastor Brian Houston had earlier on Wednesday said churches were being left behind as other COVID-19 restrictions eased, with 300 guests being allowed at weddings from December.
Mr Houston's Sydney mega-church has a 4000-person capacity but services were restricted to just 100 people.
"(At) the grand final this week, 40,000 to 45,000 people (will be) hugging, shouting, spitting, high-fiving - it's just the inconsistency of it," Mr Houston told Sydney radio 2GB.
Health Minister Brad Hazzard said he was sorry if some religious leaders felt they were being ignored but he only heard of their concerns through the media.
Exemptions had been granted for a number of large churches, he said.
It comes as NSW has recorded two new cases of locally transmitted COVID-19 - both linked to known clusters - while testing rates doubled overnight.
Nearly 15,000 people heeded NSW Health's plea for more people to get tested, compared with just 7401 in the previous 24 hours.
Eight cases were diagnosed in returned travellers in hotel quarantine.
A public health alert has also been issued for Bavarian Macarthur in Macarthur Square at Campbelltown, with a confirmed case having visited on the evening of October 10.
Anyone who dined at the restaurant for an hour or more must immediately get tested and isolate for 14 days and stay isolated for the entire period, even if their test was negative.
Anyone who was there for less than an hour must monitor for symptoms and get tested immediately if they develop any symptoms and after testing, they must remain in isolation until a negative result is received.
NSW Health is treating 72 cases, with one patient in intensive care.
