The third submarine attempted to torpedo the heavy cruiser USS Chicago, but instead sank the converted ferry HMAS Kuttabul, killing 21 sailors.

The physical effects were slight: the Japanese had intended to destroy several major warships, but sank only an unarmed depot ship and failed to damage any significant targets during the bombardments.

The main impact was psychological; creating popular fear of an impending Japanese invasion and forcing the Australian military to upgrade defences, including the commencement of convoy operations to protect merchant shipping.

[6]: 65  On the evening of 16 May, I-29 fired on the 5,135 long tons (5,217 t) Soviet merchant vessel Wellen, 30 mi (26 nmi; 48 km) from Newcastle, New South Wales.

[8]: 62  A secret radar unit set up in Iron Cove detected the flight, but authorities dismissed its report as a glitch, as there were no Allied aircraft operating over Sydney.

[2]: 170–71  The report, which the Allied FRUMEL signals intelligence network partially intercepted, resulted in the Japanese Navy selecting Sydney as the target.

[6]: 64 Before dawn on 29 May,[I] I-21's floatplane, piloted by Ito Susumu,[11]: 340  performed a final reconnaissance flight over Sydney Harbour, with the mission of mapping the locations of the major vessels and of the anti-submarine net.

[8]: 75, 79 After completing their mission, the midgets were to depart Sydney Harbour and head south for 20 nmi (23 mi; 37 km) to the recovery point off Port Hacking.

[2]: 206  At 20:15, a Maritime Services Board watchman spotted the midget after it passed through the western gap, collided with the Pile Light, then reversed and trapped its stern in the net.

[2]: 208  Upon confirming that the object in the net was a "baby submarine", Lolita dropped two depth charges while Yarroma's commander requested permission from Sydney Naval Headquarters to open fire.

[2]: 211  Some of the 5 inch (127mm) shells skipped off the water and hit Fort Denison's Martello tower, while fragments were later found in the suburbs of Cremorne and Mosman.

[2]: 212  It turned and sailed east for about 1 nmi (1.2 mi; 1.9 km), then took up a firing position south-west of Bradleys Head, from where its commander could see Chicago's stern silhouetted against the construction floodlights at Garden Island's new Captain Cook Graving Dock.

[2]: 225 [5]: 188–89  FRUMEL picked up wireless traffic between the five submarines, leading the Royal Australian Air Force to task three Lockheed Hudsons and two Bristol Beauforts with finding the source of the communications.

[5]: 191, 193, 199  The attacks forced the authorities to institute changes in merchant traffic; travel north of Melbourne was restricted until a system of escorted convoys was established.

[2]: 249  A United States Army Air Forces pilot, 1st Lieutenant George Cantello, based at Bankstown Airport disobeyed orders and took off to try and locate the source of the shelling, but was killed when engine failure caused his Airacobra to crash in a paddock at Hammondville.

[19] In 1988, following efforts by residents and the US Consulate in Sydney, the City of Liverpool established a memorial park, the Lt. Cantello Reserve, with a monument in his honour.

The subsequent operations were no more successful as the five large Japanese submarines sank only three merchant ships and caused minimal property damage during the two bombardments.

Muirhead-Gould had been hosting a dinner party on the night of the attack, and one of the main guests was the senior United States Navy officer in Sydney Harbour, Captain Howard Bode of USS Chicago.

As the submarines fired armour-piercing shells, intended for use against steel ship hulls, the relatively softer brick walls may have failed to trigger the impact fuses.

[5]: 197 In Sydney, fear of an impending Japanese invasion caused people to move west; housing prices in the Eastern Suburbs dropped, while those beyond the Blue Mountains rose significantly.

[2]: 225  Instead, on the morning after the attack, the front pages carried news of Operation Millennium, the Royal Air Force's first 1,000-bomber raid, although several newspapers included a small interior article mentioning the final reconnaissance flyover.

[16] The Australians recovered the bodies of the four Japanese crew of the two midget submarines sunk in Sydney Harbour and had them cremated at Eastern Suburbs Crematorium.

[6]: 72 [8]: 250  The purpose of the tour was twofold; it allowed Australians to see a Japanese midget submarine up close, and was used to raise A£28,000 for the Naval Relief Fund and other charities.

[8]: 253–55  The composite submarine was restored and remains on display inside the Memorial as part of a permanent exhibition on the attack, next to the recovered wheelhouse of HMAS Kuttabul.

[28] One early theory about the midget's fate was that it was damaged or destroyed, along with M-21, in or around Taylors Bay, which would account for reports from Steady Hour and Yarroma of multiple submarines during their three-hour attack against M-21.

[6]: 71 [2]: 217  A second theory was that the midget attempted to return to the mother submarines but exhausted its battery power before reaching the Port Hacking recovery point and would therefore be outside and to the south of Sydney Heads.

[2]: 217  The third theory was that the midget's crew decided to avoid endangering the five larger submarines during the recovery process, and either ran straight out to sea or headed north.

[2]: 184 A group of seven amateur scuba divers solved the mystery in November 2006, when they found a small submarine sitting upright on the seabed, 55 metres (180 ft) below sea level and approximately 5 kilometres (2.7 nmi; 3.1 mi) from Bungan Head, off Sydney's Northern Beaches.

[17][29] Commander Shane Moore, the officer responsible for the Royal Australian Navy's heritage collection, confirmed that the wreck was M-24 after viewing footage from multiple dives, along with measurements the group had taken.

[28] HMAS Melbourne then carried relatives of M-24's crew to the wreck site, where they poured sake into the sea before being presented with sand taken from the seabed around the submarine.