From Monday up to 20 people can attend weddings and up to 50 can go to a funeral or a place of worship.
But social distancing must be maintained and the four square metre rule applies.
Premier Gladys Berejiklian's announcement is being welcomed by church leaders in the Illawarra who intend to proceed with caution.
NSW Health has developed a checklist to help places of worship create a tailored COVID-19 safety Plan to help keep people safe And NSW chief health officer Dr Kerry Chant said communal singing and chanting should not occur because of the high risk of transmission of the virus.
St Mark's Anglican Church minister Rev Peter Hutchinson said church services will initially return only for the older and more isolated members of the congregation.
The first service is likely to occur at 8am on June 7 but it will be limited to older parishioners and won't be widely advertised.
"We will have all the processes in place to make sure everything is really safe. We are really excited about reconnecting many of our older parishioners".
Rev Hutchinson said some things had worked really well during COVID-19.
"We actually want to keep the beautiful things that have been happening in our online church streaming," he said.
"There has been a lot of creativity and collaboration. People thinking differently and using technology in smart ways has really revolutionised what a church service looks and feels like. And helped us think about our own distinct qualities here in West Wollongong. We want to take that learning forward.
"We might direct a fair bit of planning into that kind of online engagement because what we have found is we have actually had more people participate in services during this time of COVID than we had in the church beforehand.
"That is because the accessibility of the technology has allowed a lot more people to engage".
Wesley Uniting Church on the Mall's Rev Geoff Flynn said many parishioners were eagerly looking forward to when they can sit on a church pew again. But they will only be allowed to sit in every second pew when the doors to reopen.
Rev Flynn said no services will be held until the NSW synod gives the church the go ahead
"Our church is really wanting to be patient and put people's health first," he said.
Rev Flynn does not expect to get too many bookings for weddings yet because many people are waiting until they can have at least 70 to 80 guests.
He said Wesley Uniting Church had a number of baptism services cancelled during COVID-19 and is looking to reschedule those.
But on the subject of funerals Rev Flynn is unsure whether families will want to hold memorial services in a church for only 50 people.
During the last two months Rev Flynn has been emailing a worship-at-home guides to parishioners and using Zoom technology for services.
"It is still not as good as face-to-face but I think it has been a period of growth for our congregation who have learned how to use new technology to stay connected" he said.
At the Catholic Church Bishop Brian Mascord sent out a pastoral statement that said after prayerful consideration the diocesan response to the NSW Government's latest COVID-19 restriction changes was that masses, weddings, funerals, baptisms and reconciliation may be held at the discretion of the parish priest in consultation with their Pastoral Council or leadership team.
Bishop Mascord said he was grateful for the support he and fellow clergy had received as they implemented the guidelines recommended by Australian health authorities to minimise harm to those most vulnerable.
NSW health minister Brad Hazzard said extensive COVID-19 outbreaks in places of worship and amongst choirs' overseas was the reason why the NSW Government had been cautious in easing restrictions.
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