The state government has banned water taxis from operating at some of the most popular wharves in Sydney at busy periods during the festival, prompting legal threats from the industry.

The annual light and music festival has at times become a byword for traffic and public transport frustrations as tens of thousands gather around Sydney Harbour.

In response, authorities are putting on extra public transport services. But Roads and Maritime Services is also planning to prevent commercial vessels accessing a number of wharves at Circular Quay during the festival.

The access points would be closed on Friday and Saturday nights and on the Sunday of the long weekend during Vivid - a decision that has angered water taxi operators.

"Their claim is that we could cause crowd control issues when we are disembarking or embarking passengers," said Lance Jones, the owner and operator of Majestic Water Taxis.

"They've got no proof of this, there's been no occurrence or no issues in years that have gone past," said Mr Jones.

"This is a land-based issue, not a maritime issue."

Mr Jones said he would typically carry as many as 200 people during a busy Friday or Saturday night, and other operators could carry about 2000 in total.

Another water taxi operator, Nathan Lay, said the restrictions on access to Circular Quay, the most popular pick-up and drop-off zone in Sydney, could cost him about $2000 to $3000 a night.

Both Mr Lay and Mr Jones said water taxis played a role in moving people off the crowded harbour as well as depositing people on-shore.

"I don't think it makes sense," said Mr Lay. "I don't think the authorities are using commonsense."

A spokeswoman for Roads and Maritime Services said Commissioners Steps, Harbour Masters Steps, Campbells Cove and Ives Steps would all be closed to commercial vessels on Friday and Saturday nights during the festival. But commercial vessels could use, subject to booking, Eastern Pontoon, Man O' War Steps, Walsh Bay 2 and Towns Place.

According to the state government, 1.43 million people attended Vivid last year. The government says it is putting on an 3,500 trains, buses and ferries to run during the festival.

Lawyers for Mr Jones, meanwhile, have written to RMS demanding an "urgent attempt to address RMS' foreshore crowd safety concerns so that agreement can be reached on a basis that the water taxis could operate without or with limited restrictions." The lawyers argue that RMS has over-stepped its powers in imposing the restrictions.