Authorities have warned swimmers at the Australian tourist attraction following the freak natural event.
Contact with the ammonia-filled algae could cause skin and eye irritation and tests are being conducted to establish if there are any other dangers.
Local lifeguard Bruce Hopkins said: "It has got quite a fishy smell to it.
"It can irritate some people's skin but generally not much more than that."
Irene Eristian, 33, said: "I wasn't sure if I should let my daughter into the water as I wasn't sure what it was."
But not everyone has obeyed the notice, with several swimmers taking a dip at Bondi Beach, and also-affected Clovelly Beach.
A spokesman for the New South Wales Office of Water said that the algae - known as sea sparkle - may have been caused by an upswell of nutrient-rich water.
And the local council warned: "There are some possible risks to human health including skin rashes and eye irritation and for this reason the beach will remain closed until the algae dissipates."
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