A ferry carrying the 3.8-metre World Youth Day cross and an icon portraying Mary and Jesus glided past the city's opera house while pilgrims on board waved to those on shore.
Hundreds of people waiting at the wharf burst into applause and belted out Australia's unofficial anthem, Waltzing Matilda, as the boat docked and the cross was carried off the ferry for a procession through downtown Sydney.
"I think at this moment, everyone is saying the journey is complete," Sydney Auxiliary Bishop Julian Porteous said.
The cross was carried in a procession along one of the city's main streets to a park, where hundreds of pilgrims lined up for a chance to place their hands on it. Some overcome by emotion clung to each other and cried.
Benedict arrived on Sunday at a military air base on the outskirts of Sydney and will rest for several days before joining the festivities on Thursday. World Youth Day, which begins on Tuesday and runs through to Sunday, is expected to attract more than 200,000 participants and is the largest public event in Australia since the 2000 Olympic Games.
Benedict is to be greeted at Sydney Harbour on Thursday by a group of Aborigines and other young people. He will then tour through Sydney in a parade that is expected to shut down most of the downtown district.
He will join a crowd expected at a vigil before leading Mass next Sunday at the culmination of the festival.
