Diving operations at Garden Bay, in Sydney Harbour, have been suspended as Navy boat crews search for a shark that attacked a Navy diver.
Able Seaman Paul Degelder suffered serious wounds to his hand and thigh after fighting off the shark which attacked him just before 7am local time on Wednesday within sight of the Sydney Opera House.
He was taken to St Vincent's Hospital, where he underwent surgery and was in intensive care in a serious but stable condition.
Mr Degelder, 31, was in the water with a police diver as part of an underwater trial to test new naval defence technology.
Australian Fleet Commander Rear Admiral Nigel Coates said it was the first time he had heard of a navy diver being injured in such an incident.
Since 2 February, the Navy has been conducting its Kondari Trial to test new technologies designed to protect Australia's ports, naval bases and ships from water attacks.
The trials include detecting divers with sonar equipment and using remotely operated underwater vehicles to inspect the hulls of ships, as well as piers and surrounding sea beds.
Those operations have been called off following the attack, as boats are deployed to search for the shark.
Marine experts believe sharks are being lured into the harbour in greater numbers by schools of kingfish and salmon and other fish thriving in its cleaner waters.
The last shark fatality in Sydney Harbour was in 1963 when Martha Hathaway died from a bull shark attack.
In 1996, a drunken swimmer was bitten on the buttocks by a bull shark in the Parramatta River, followed by shark attacks on kayakers on the river in 2000 and 2002.
Also in 2000, a man was bitten by a shark while swimming in the harbour at Mosman.