Emergency services were called to New Beach Road, Darling Point where boats are moored at the Cruising Yacht Club of Australia, about 6.30pm on Friday.
A man, believed to be in his 50s, was pronounced dead at the scene but had not been formally identified.
A report will be prepared for the coroner.
The crash occurred shortly before the start of the Cabbage Tree Island Race, the last offshore race contested by entrants in the Sydney to Hobart yacht race that begins on Boxing Day.
The Cruising Yacht Club of Australia confirmed the boats were not competing in the Cabbage Tree race (Dean Lewins/AAP PHOTOS)
In a statement to AAP, the Cruising Yacht Club of Australia (CYCA) said the boats were competing in an unrelated race.
Two boats, Alive and Maritimo 100, pulled out of the Cabbage Tree Island Race prior to the start but were not involved in the crash.
"Last night, there was a tragic accident on Sydney Harbour in which a crew member was killed when two boats participating in races unconnected with the CYCA collided," the statement read.
"As one of the boats is usually berthed at the CYCA, the police used our facilities to berth the yachts involved and to interview witnesses.
"We extend our deepest sympathy to the family and friends of the deceased crew member. Our thoughts are also with the crews and all those affected by this devastating event."
Both boats involved in the collision have been seized by police for mechanical examination, with both skippers subject to mandatory testing.
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