The state reported 23,131 new cases on Tuesday, 2337 more than the previous day.

There were 1344 people in the state's hospitals with COVID-19 on Tuesday, 78 more than the previous record set on September 21 when NSW was in the grips of the Delta variant.

The number of hospitalised patients was 140 higher than the previous day.

Two more deaths were reported on Tuesday, men in their 70s and 90s, both of whom had received two doses of the vaccine.

The new cases were diagnosed from 83,376 tests processed in the 24 hours to 8pm on Monday, with the positivity rate at a record 27.7 per cent.

While ICU numbers are rising - 105 at the latest count - they remain well short of the peak of 244 in September.

Intensive care admissions continue to be driven largely by the more severe Delta.

Since December 16, about 74 per cent of patients in NSW ICUs for whom the variant is known had Delta, a NSW Health spokesperson told AAP.

"Importantly, more than 62 per cent of those patients with the Delta variant were not vaccinated or had one dose of vaccine," the spokesperson said on Tuesday.

With genomic sequencing impossible to undertake for all new cases, NSW Health is prioritising sequencing for patients in ICU to understand the impact of both the Delta and Omicron variants, the spokesperson said.

Deputy Chief Health Officer Jeremy McAnulty on Tuesday said health workers continued to see many unvaccinated people being admitted to ICUs, including young people.

The increasing hospitalisation numbers may mask the true picture of the severity of the virus, with a small NSW Health study finding some patients counted in the numbers were actually admitted to hospital for completely different reasons, like childbirth.

NSW Health says with the significant spread of COVID-19 in the community, it's unsurprising that patients admitted for other injuries and illnesses will also be found to have the virus.

While hospital numbers have reached a record level, the proportion of cases needing hospitalisation is far lower than during the Delta wave.

NSW has recorded more than 5000 daily cases for 13 consecutive days.

Case numbers during Delta peaked at 1599 in early September.

Meanwhile, Dr McAnulty reminded those returning to work that masks are mandatory in all indoor settings apart from homes.

"We're encouraging people to work from home where it's practical do so," he said.

"This will help minimise the number of people travelling to and from work and in the office."

Dr McAnulty advised anyone who is eligible for a booster shot to book in promptly as a new year's resolution.

Some 4602 of the new cases were diagnosed in South East Sydney Local Health District and 4258 in the city's southwest.

A strong surge continued in the Hunter New England district, which had 1689 new positive results overnight.

Australian Associated Press