© Michele MossopThe "tent city" in Martin Place - which was erected by rough sleepers in 2017 and later dismantled - sparked a standoff between the state government and the City of Sydney.
Premier Gladys Berejiklian has vowed to halve the number of people sleeping on the state's streets by 2025, promising to tackle the "root causes" of homelessness.
Ms Berejiklian pledged her government's commitment to the target as she signed an agreement alongside representatives from homelessness service providers and the City of Sydney at NSW Parliament on Wednesday.
"The social problems that are attached to homelessness and the cycle of homelessness are really the root cause of what we need to deal with," Ms Berejiklian said.
"We know, unfortunately, that those who are prone to homelessness - even after you provide a roof over their head - need that wrap-around support of other services to ensure their opportunity for independence."
The state's progress towards the target will be monitored by the Institute of Global Homelessness, which will assist service providers to developer strategies and track results.
NSW is the 10th jurisdiction around the world to sign up to the insitute's program. The city of Adelaide has also signed up.
The City of Sydney, which collects data on the number of rough sleepers in the CBD, recorded 278 people sleeping on the streets in August - the lowest number in five years.
Social Housing Minister Pru Goward said one of the initial goals of the program would be to gather data on the number of rough sleepers, as homelessness figures for regional centres such as Dubbo were "not clear".
The target was welcomed by independent Sydney MP Alex Greenwich who said it would "kick start urgent action", but that it must be matched with "bold plans and system change".
He said the lack of safe and affordable homes was the key driver of homelessness, and said the government needed to increase the provision of social housing by at least 5000 new homes every year until 2026. Mr Greenwich's comments were echoed by Sydney lord mayor Clover Moore.
"Less than one per cent of houses and apartments built in Sydney in the past eight years are affordable. Without urgent action to provide housing in the inner city, the efforts of this initiative will simply not work," Cr Moore said.
Chief executive of Homelessness NSW Katherine McKernan called for services to be given assistance to "reconfigure their approach so that there is an increase in supportive housing delivery rather than crisis support". © Tanya LakeA homeless man appeals for help in Sydney.
The Berejiklian government says it has committed $1 billion in funding for homelessness services over the next four years.
Ms Goward would not say whether additional funding would be needed in order to meet the target.
"It's not just about the money," she said. "It's how you spend the money."
The agreement also represents a new accord between the state government and the City of Sydney over homelessness in the CBD. It follows the spectacular disagreement between the two in 2017 over how to handle the emergence of a "tent city" of homeless people in Martin Place.
The camp was ultimately disbanded after the Berejiklian government passed special laws enabling police to remove the tents on "public safety" grounds.