Just before 6 p.m., local time, passengers said a metal rod -- which appeared to be a piece of track -- pushed up through the floor of the third carriage of the train near Edgecliff Station.
"A metal rod came through the floor and curved over and hit the roof a bit and there was a lot of dust," said one passenger, who gave her name as Sophie. "At first it was [scary] and then when it started moving again and the carriage was really loose, after that it was OK."
She said there was some panic among passengers at first, but then everyone settled down.
There were no serious injuries and none of the passengers was hospitalized, Australian Broadcasting Corp. reported.
The derailment caused delays on the Northern and Western, and Airport and South lines.
The cause of the accident was under investigation, Sydney Trains chief executive Howard Collins said.