Australia's largest city, Sydney, is set to overhaul its controversial night-time alcohol restrictions in a bid to end its status as a "boring" city.

From Jan 14, alcohol service bans and entry restriction at nightclubs and bars around the city centre will be eased. But the laws will still apply in Kings Cross, a popular nightclub hot spot where some of the most violent alcohol-related incidents have occurred.

The so-called "lockout laws" introduced in 2014 were designed to prevent alcohol-fuelled violence, following the deaths of two teenagers who were punched in unprovoked attacks by drunken strangers.

The laws imposed a 1.30am last-entry time on venues serving alcohol and a no-alcohol restriction after 3am in the city centre, among other restrictions.

But critics said the laws damaged nightlife in Sydney, which has a population of about five million, and turned it into a "ghost town".

To inject more life into the city, the state government plans to lift the 1.30am entry ban and to allow bars and other venues to serve drinks for an additional 30 minutes until 3.30am. Restrictions on serving cocktails and shots of alcohol after midnight will also be removed.

Liquor shops across the state will be allowed to sell alcohol for an hour more, with closing times extended from 11pm to midnight from Monday to Saturday. Closing time on Sunday will remain at 11pm.

New South Wales Premier Gladys Berejiklian said the extended time for last drinks will put Sydney in line with other global cities such as New York and Singapore.

"In places like New York, it's 4am, in Singapore it's 4am and in Los Angeles it's 2am. So 3.30am certainly compares to what other cities are doing," she told reporters last month.

"Sydney has transformed dramatically over recent years, and we need to ensure we have a strong and vibrant night-time economy that reflects our position as Australia's only truly global city."

In Singapore, bars and clubs in Clarke Quay stop selling liquor by 4am on Sundays and public holidays, and by 3am during the rest of the week. In public places like parks and Housing Board void decks, alcohol consumption is not allowed from 10.30pm to 7am.

In Sydney, even before the laws were introduced, the city had a reputation for a relatively lacklustre late-night culture. Many popular drinking venues shut at midnight, and restaurants often stopped taking orders at around 9.30pm.

The legislation had prompted widespread opposition from the hotel and alcohol industry, as well as protests from groups representing young people who claimed that the measures were ruining Sydney's nightlife and live music scene. It even spawned a political party called Keep Sydney Open.

City of Sydney councillor Jess Scully welcomed the changes, saying the measures had cost A$16 billion ($14.9 billion) a year in lost revenue and "tarnished our reputation as a fun, global city".

She denied claims that drunken violence would increase, saying problem drinking among young Australians has fallen in recent years. She said the rise of ride-sharing apps and improved public transport have helped people to move around more easily and safely.

"We found ourselves constantly defending our city from accusations of being boring, that the nanny state had driven Sydneysiders onto the couch, with only Netflix and Uber Eats where our social lives used to be," she wrote in The Sydney Morning Herald.

"Our city hasn't been allowed to shine these last few years but... we can make it sing again."

But doctors and health workers urged the government to keep the restrictions, saying the laws had helped to reduce the number of alcohol-related assaults. Some said that allowing liquor stores to stay open for an additional hour would increase domestic violence incidents.

St Vincent's Hospital, a large inner-city hospital in Darlinghurst, called the changes "disappointing". It said the laws had saved it hundreds of thousands of dollars in medical costs.

"More alcohol equals more harm," Dr Paul Preisz, an emergency medicine specialist at the hospital, told ABC News. "We can't be clearer than that."

A parliamentary committee earlier this year found that the laws had decreased rates of violence in the city centre, but had also reduced the city's vibrancy and hurt its night-time economy.

"We want everyone to be able to enjoy this from day through to twilight, and into the night, and to do so in a safe, fun and vibrant atmosphere," said the committee's chair, Ms Natalie Ward, in its report.

The government plans to review the changes to the lockout laws in 12 months.