A breakdown in data from Census 2016 shows that almost half of Australia's Muslim population now lives in Sydney.
The number of Muslims living in greater Sydney rose by 5.3 per cent in 2016 to 253,436 people.
This accounts for 40 per cent of the total Muslim population of 604,000 living in Australia in 2016.
Islam was revealed to be the fastest growing religion in the city.
The latest census figures also revealed the Muslim religion in Australia overtook Buddhism as the most popular non-Christian religion.
The number of Muslims living in the country almost doubled from 341,000 in the 2006 census.
The Census also revealed an additional 2.2 million people registered as having no religion – surpassing Catholicism as the country's most popular religious affiliation.
Data from the 2016 census, released on Tuesday, shows 30 per cent of Australians identified as having no religion, compared with 22 per cent in the 2011 census and almost 19 per cent in 2006.
Out of Australia's population of 23.4 million people, 7,040,700 people identify as having no religion.
Catholics make up just over 22 per cent – or 5.2 million people – followed by 3.8 million Christians – or 16.3 per cent.
Residents aged between 18 and 34 years were more likely to affiliate with no religion than to Christianity, the census revealed.
On the other hand, about 70 percent of people over the age of 65 reported themselves and Christians.
From 2006 to 2016, the proportion of people who reported a religion other than Christianity in the Census increased from 5.6 per cent to 8.2 percent, the census shows.
Hinduism and Islam have been the top two fastest growing non-Christian religions in the country during the past decade.
Hinduism grew from .7 per cent of the population to 1.9 per cent in 2016 – securing the third spot for the most popular non-Christian religion
Dropping from 2.5 per cent to 2.4 per cent, Buddhism fell to the second spot as Islam rose to the top with 2.6 per cent of the population.
Sikhism is listed as the fourth most popular non-Christian religion with .5 per cent, followed by Judaism at .4 per cent.
Meanwhile, the number of Australians speaking only English at home dropped from almost 77 per cent in 2011 to almost 73 per cent in 2016.