It is believed to have been started deliberately on Saturday near Leacocks reserve in Casula and had spread over 2,500 hectares by late Sunday.
The New South Wales Rural Fire Service (NSW RFS) said there was evidence suggesting the fire was deliberately lit.
Shane Fitzsimmons, RFS assistant commissioner, said: “It is sickening and reprehensible.
Pictures show the inferno devastating huge areas of bushland as firefighters continue to battle the blaze using hoses and helicopter water bombs.
Hundreds of firefighters were brought in from a wide area of Sydney to help protect properties as residents were evacuated from their homes. While others were told it was too dangerous to leave.
The threat from the fire has been reduced and is now at “advice” level, however the fire service said the blaze remained dangerous and unpredictable.
Residents in Sandy Point, Pleasure Point, Voyager Point, Alfords Point, Barden Ridge, Illawong, Menai and Bangor are able to return home but are still advised to keep an eye on the situation.
Strong winds have fanned the blaze and gusts reached up to 70km/h on Sunday, and dry conditions combined with “unprecedented” early autumn temperature.
The winds speeds were not as severe on Monday, so it made it easier for the authorities to tackle the blaze.
However Mr Fitzsimmons said the winds could pick up again on Monday and increase the danger of the fire.
The number of firefighters tackling the blaze has reduced significantly from about 500 firefighters on Sunday to about 250 on Monday.
Authorities said it was “miraculous” no homes were damaged and no-one was injured in the inferno and Mr Fitzsimmons said a major reason why no properties were lost is due to the community working with emergency services.
He said: “We have seen a decisive community..prepared to act in accordance with their bushfire survival plan.”
Police have established a strike force to investigate the cause of the fire, which they are treating as suspicious.