The NSW government and the state branch of the Rail, Tram and Bus Union have been locked in a dispute for months, but it escalated on Tuesday when Transport Minister Jo Haylen announced no train services would run from Thursday until Sunday.
The rail union has been increasing work bans, with threats to strike if 24-hour services were not available four days a week.
But transport officials said running services around the clock from Thursday to Sunday was not sustainable.
"As a result of the union not withdrawing their bans, I need to inform the travelling public that there will not be train services between Thursday and Sunday this week," Ms Haylen told reporters.
More than one million people use Sydney trains on a typical day, while the ban is also expected to affect inter-city services in the state.
Extra bus and other services will be rolled out, but the train shutdown would strain the capacity of replacement transport options.
Ms Haylen said the onus was on the union to drop its work bans after it knocked back a proposal to run one city line - Strathfield to Hornsby - around the clock on the weekend.
"The advice from the union is the bans as notified have not been withdrawn," Sydney Trains chief executive Matt Longland said.
"You can't just chop and change the timetable a day out," he said.
But the union accused government officials of being disingenuous, saying they had refused further meetings to resolve the dispute.
"The RTBU forced the NSW government to run transport 24-hours on weekends as a form of protected industrial action because we would much rather do something that benefits commuters while inconveniencing managers, than be forced to take action that inconveniences commuters," state secretary Toby Warnes said.
"If the NSW government chooses to shut down the rail system at any stage this week, it will be entirely their decision," he said.
The shutdown is expected to impact two Pearl Jam concerts at Sydney Olympic Park and an A-League match at Moore Park.
The pay stand-off comes after services were run around the clock over the previous weekend to ward off stop-work bans.
