Health Minister Ryan Park announced the state's 165 PCR clinics will close by May 13, saying demand for the free clinics has dwindled and they are costing the state "money we simply don't have".
"Since January we've seen a significant reduction in demand for PCR testing driven by changes in health recommendations, testing behaviour and increased access to rapid antigen tests (RATs)," he said on Wednesday.
Operating and staffing the clinics this year alone had cost between $11 and $12 million, he told Sydney radio 2GB on Wednesday.
"That's money that ... needs to go into health services across NSW," he said.
The state will transition to a new model of COVID testing which will be more cost effective and better support the needs of the community, he said.
Premier Chris Minns flagged the change on Tuesday, saying he had recently driven by a Sydney testing clinic that was empty.
"We need to make sure that public money has been protected," he said.
Chief Health Officer Kerry Chant said the majority of people found RATs the most convenient option but advised people most at risk of severe COVID to get a PCR test.
"PCR testing requested by a medical or nurse practitioner will continue to be available at private pathology services with a referral form," Dr Chant said.
"This will ensure effective, fast diagnosis so those who are most at risk are able to get timely access to antiviral therapies."
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