Residents at five heritage-listed apartment blocks and a boutique hotel in Springfield Avenue, Potts Point, were evacuated about 11.15am (AEDT) on Monday due to fears the large construction crane might fall.
The alarm was raised by a resident, who told emergency service operators the crane was "leaning".
However, WorkCover said after inspecting the 35-metre tower crane it posed no threat to public safety.
Residents and hotel guests have returned to their buildings.
A WorkCover spokesman said an inspector was carrying out additional tests to guarantee the crane's safety.