Their trip comes just days after their pregnancy announcement- which came just in time for Meghan Markle to show off her precious baby bump!
She later joined the prince to watch sailing events, and at a lunchtime reception hosted by Australian Prime Minister Scott Morrison.
"First of all, thank you for the welcome you have given Meghan and I over the last few days".
The Duchess of Sussex was expected to attend the Invictus Games cycling events in Sydney, but pulled out because she was exhausted.
A Palace source said: "She is not sick, just exhausted".
In a stroll on Bondi, the couple, who are expecting their first child in the northern spring, shook hands and posed for photographs with some of the thousands who turned out for the event, snapping pictures and video with their smartphones.
"She said she was up at 4:30 a.m. this morning doing yoga in her room as she couldn't sleep", Waverley added, according to Sky News.
It means that Meghan will travel with her husband to Fraser Island in Queensland tomorrow but he will visit the internationally recognised conservation site on his own instead.
"Meghan told me that pregnancy was like having jet lag", Charlotte, a 35-year-old woman Markle and Harry met at the surfers mental health group OneWave, said.
Among their new friends was Angel the special needs dog and the children from the Kookaburra Kids Foundation, who gave the couple two stuffed kookaburra toys for their baby. They waved to the crowd as they made their way across the harbour, before boarding the boat, which had been anchored just metres from the spot at Farm Cove where Prince Harry's grandmother Queen Elizabeth first stepped onto Australian soil in 1954.
No decisions have yet been taken about the Duke and Duchess' plans in Fiji and Tonga, where they are due next.