Lord Mayor Clover Moore said Sydney needed more cafe-style bars rather than the large 'beer barns' currently dotted around the city centre which failed to cater to sophisticated drinkers.
Moore cited Melbourne, Sydney's traditional rival for the title of Australia's premier city, as an example of how revamped licencing laws should work.
'Licencing laws in Sydney are complex and costly compared to Melbourne,' she told AFP. 'They discourage smaller, perhaps more sophisticated, more interesting and more civilised venues.'
Moore said the current licencing laws were a hangover from the days of Sydney's 'six o'clock swill' from the 1950s and 1960s, when authorities forced pubs to close early in order to encourage workers to go home to their families.
Instead, it resulted in an hour-long speed drinking session, where workers rushed to down as much beer as possible after leaving the office at 5pm.
Many of the large pubs with tiled bars that could easily be hosed down remain in Sydney, and Moore said they did not meet the needs of many international visitors.
'It's a different sort of experience, some people like to drink beer in large, crowded bars but it's not for everyone,' she said.
'It also encourages flow (of patrons) onto the street and can lead to excessive alcohol consumption which can result in anti-social behaviour or violence.'
Moore said that under current laws, Sydney bars face fees of up to 60,000 dollars (48,000 US) for a liquor licence, compared to a maximum 500 dollars in Melbourne.
She said the laws should be changed to reflect Sydney's status as a cosmopolitan, international city.
'Sydney is Australia's business capital, it's where the deals are sealed,' she said. 'We need sophisticated bars where people can talk face-to-face while taking in the stunning views of our beautiful city.'
Moore, who is also a member of the New South Wales state legislature, will introduce a bill to the state parliament later this year outlining her proposed changes.