Gladys Berejiklian's government will leave Sydney with a lopsided patchwork of councils, after abandoning its policy of local government amalgamations halfway through.

The Premier announced on Thursday that her government was walking away from its policy of merging Sydney councils, which have challenged their amalgamation in court.

The about-face means the state government will have created huge discrepancies in the size of councils across Sydney. The forced merger of Canterbury and Bankstown councils last year created a mega-council of 360,000 residents; after Thursday's announcement Hunters Hill Council will remain independent and serve about 14,000 residents.

Ms Berejiklian attributed the abandonment of the council merger policy to the protracted nature of legal challenges launched by local governments that had resolved to resist their merger. She said she could not in good conscience allow electors to vote in council polls in September while not knowing what would happen to their councils.