"NSW Health today sadly reports the death of a woman in her 50s who was a confirmed Covid-19 case. She was a resident of south western Sydney and a close contact of a Covid case," the department said.
"This is the 61st death in NSW related to Covid-19 and the fifth of the current outbreak.
"NSW Health extends its sincere sympathy to her family and friends."
It has been reported from the scene that police officers have worn PPE while inspecting the home.
Earlier, NSW Police said: "An investigation has commenced and a report has been prepared for the coroner."
NSW today recorded 98 new locally acquired Covid-19 cases, 20 of which were infectious while in the community.