The Berejiklian government will wind back water restrictions in two weeks after the city's dams reached 80 per cent capacity following the recent downpours across Sydney.

NSW cabinet on Monday agreed to ease the restrictions from March 1, when they will be returned to level 1 restrictions. The two-week delay is to ensure water quality has improved after the bushfires.

Ash contamination from the fires was found in Sydney's main water source, forcing utilities to use alternatives for the city's drinking water after last week's deluge in the catchment.

Warragamba Dam came back online on Monday, with the water quality continuing to be monitored.