The crash happened on the Hawkesbury River near the suburb of Cowan.
Police divers have recovered six bodies from the wreckage, which is lying in 13m (43ft) of water.
Unconfirmed reports say the casualties included an 11-year-old boy, the pilot and four British nationals. The single-engine aircraft belonged to sightseeing flight company Sydney Seaplanes.
Investigators do not yet know why the plane crashed.
Acting Superintendent Michael Gorman said the "recovery operation continues" at the site where the single-engine aircraft crashed.
The British Foreign Office said: "Officials from the British consulate are in contact with local authorities in relation to a seaplane accident near Sydney. Staff are ready to provide consular assistance."
An eyewitness, Myles Baptiste, told the broadcaster 9News that the plane was 500m (1,640ft) from him when it hit the water.
"It made a tight right-hand turn and as it actually turned around, the wings dipped and it nosedived straight into the water," he said.
A woman at the scene told local TV the weather had been "a bit bumpy" but "nothing to be concerned about".
Some debris was recovered from the water on Sunday.
Sydney Seaplanes offers scenic flights over local tourist attractions and waterways including the Opera House, the Harbour Bridge and Pittwater, as well as the Hawkesbury River region.
The firm said it was suspending all operations until further notice and was helping police with the investigation into the cause of the crash.
"All at Sydney Seaplanes are deeply shocked by this incident and the resulting loss of life. We wish to pass on our heartfelt condolences to the family and friends of the passengers and pilot who were tragically killed," the company said in a statement.