About 1,000 people gathered at the George Street landmark in the city’s centre, although Mr Netanyahu was not in the area.
Mr Netanyahu spent the second day of his five-day tour meeting Federal Government ministers and visiting a Jewish school in Sydney’s eastern suburbs.
Prime Minister Malcolm Turnbull has emphasised the strength of the friendship between the two nations but protester Mona Abuzalaf said Mr Netanyahu was not welcome here.
“He’s responsible for settlement expansion which is illegal under international law, he’s responsible for a lot of the wars that have been committed against the Palestinians in Gaza, and really this man should be tried in the ICC, not welcomed down in Sydney,” she said.
Ms Abuzalaf said her grandfather was a Palestinian refugee.
The protest was the first of Mr Netanyahu’s visit to Australia. The issue of Israeli settlements on Palestinian land is decades old and a recurring flashpoint in the conflict between the two states.
By the time he touched down in Sydney on Wednesday morning, several nations has criticised Mr Netanya’s passing of a law which retrospectively legalised about 4,000 settler homes built on Palestinian land.
Another protestor, Randa Abdel-Fattah, wanted to remind Mr Netanyahu that Palestinians had supporters.
“We will not give up. We are a resilient people and our resistance will continue until we are given restitution and our human rights,” she said.
Mr Netanyahu will meet Federal Opposition Leader Bill Shorten tomorrow, who has promised to raise the Labor Party’s anti-settlement position.
Former prime minister Kevin Rudd has also voiced his criticisms of Mr Netanyahu’s policies.