He arrived in the city last night to a warm welcome at the city’s Kingsford-Smith Airport at the start of his two-day visit to the country.
This morning he was greeted by a crowd of hundreds as he embarked on survey ship HMAS Leeuwin at the city’s Garden Island naval base before inspecting the 40-strong flotilla of warships.
The prince wore a white British Army tropical dress uniform with the sky blue beret of the Army Air Corps as he took the salute.
Among the crowd were naval trainee medics Ayesha Sweeney, 19, and Renee Simmons, 21, who live six hours’ drive away at their base in Aubrey, New South Wales.
Ms Simmons described Harry as “gorgeous”, adding: “I’m in love. He wears a uniform very well.”
Miss Sweeney added: “It was good to get a royal visit today for the review, it adds that extra excitement to it.”
Sydneysider Meagan Roberton, 50, who went to the street outside the base with her family, said: “We didn’t expect to see him today so it’s an added bonus.
“He’s gorgeous, we all love him in Australia. I remember when he was born.”
Harry was joined on board by prime minister Tony Abbott and governor general Quentin Bryce, the Queen’s representative in Australia.
The review is being held to commemorate 100 years since the Royal Australian Navy’s (RAN) first modern warships sailed into Sydney, seen as a defining moment in the country’s maritime history.
More than a million people are expected to line the banks of Sydney Harbour today for main day of the review and to catch a glimpse of the prince.
The event will involve 8,000 naval personnel and Royal Australian Air Force aircraft, and will finish with a firework display over Sydney Harbour Bridge.
Britain has sent one of its latest and most advanced ships, Type 45 destroyer HMS Daring, to represent the Royal Navy.
RAN spokesman Commodore Paul Kingshorne said the force was pleased Harry had come to mark the event.
“It is his first official visit here representing the Queen,” he said.
“The fact he is here on such a significant day for the navy and for Australia is fantastic for us.”
Spain and Britain line up at Review
Warships from the Royal Navy and its Spanish counterpart lined up in Sydney despite the continuing dispute between the two countries over Gibraltar.
The Royal Navy has sent the advanced Type 45 destroyer HMS Daring to take part in the 17-nation International Fleet Review, while the Armada Espanola is represented by the fleet replenishment ship AOR Cantabria.
The two countries, long-standing Nato partners, are involved in a diplomatic spat over an artificial reef created off the British overseas territory, which has led to retaliatory strict checks on traffic at the border, causing hours of delays for tourists and commuters.