At least 20 counterfeit currency notes have been found circulating between Blacktown, Mount Druitt, St Marys and Penrith, from August 16 to 20.
The fake money has been mainly discovered after transactions in hotels and fast food outlets.
Police warned people not to spend or pass on any notes they suspect of being counterfeit.
Anyone finding counterfeit money should contact their local police immediately.
The Australian Federal Police have also prepared photographs on how to identify forged currency.
These can be provided by local police commands.
Anyone with any information can also contact Crime Stoppers on 1800 333 000.