Sydney City were the defending champions, having defeated Adelaide Hellas to win their first title in the previous year's final, but they withdrew the competition due to the Hakoah Social Club withdrawing its financial support.
Sydney Croatia defeated South Melbourne 2–0 on aggregate in the final to win their first NSL Cup title.
[1] The NSL Cup was a knockout competition with 13 teams taking part all trying to reach the Final in October 1987.
[2] The competition consisted of the 14 teams from the National Soccer League.
Heidelberg United and South Melbourne had a bye for the First round.