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Described by Governor Phillip as 'the finest harbour in the world', Sydney Harbour was affected by accelerated sedimentation very soon after settlement in 1788. Dredging began in 1842 to deal with the problems caused by sedimentation and to enhance foreshore amenity. By the end of the nineteenth century, dredging was also excavating the bottom of the Harbour and its bays to accommodate larger ships with deeper draughts, and dredged sediment was increasingly used to reclaim mudflats or marshes deemed unhealthy or unsightly, thereby creating additional useful waterfront land. There was virtually continuous dredging in some part or other of the Harbour and its tributaries for almost 140 years. With increasing costs and mounting environmental concerns, dredging is now intermittent, and carried out largely to facilitate navigation for specific projects, despite continued sedimentation. While there was an early lack of understanding of the Australian environment and the impact of clearing on soils, the causes of increased sedimentation had been documented by the 1860s. However, measures to seriously address causes were not introduced until late in the twentieth century. This paper briefly outlines the development of the Sydney estuary to 1788, considers the impact of settlement in accelerating sedimentation, traces the development of dredging and reclamation, and discusses their significance for a number of areas of current research and environmental management, as well as to social and economic history. Within the limitations of the data available, annual sediment dredged, annual expenditure, cost per tonne, and areas reclaimed by dredging and filling are included.