Harry McAsey also welcomed Verity Firth, the NSW Minister assisting the Minister for Health, to his Sydney pub.

Ms Firth said it was a historic day despite some pubs, clubs and even health groups criticising the new laws.

She said banning smoking in the state's 3700 licensed venues was the most significant change to smoking laws since tobacco companies were forced to put graphic health warnings on cigarette packets.

Industry concerns that gambling revenue would plummet were unfounded - that didn't occur when similar bans were introduced around the world and interstate, she said.

"Although sometimes there's a drop in gambling revenues in the first year or two, what you'll soon find is that there's a pick-up in all sorts of other revenues," she said.

"The food revenues, beverage industries and all that pick up. There's real economic opportunity to bring new people to clubs and pubs."

Ms Firth said people could now take their "young family for a feed".

Mr McAsey said that although the ban, which came into effect at midnight, would drive some customers away, he believed it would entice non-smokers to the hotel.

A NSW Cancer Institute survey earlier this year found 84 per cent of people supported the new laws, with one in four saying an indoor smoking ban would encourage them to visit the local pub more often.

However, the NSW Asthma Foundation says the legislation, which allows smoking in areas which are only 25 per cent open to the elements, doesn't go far enough.

"The other 75 per cent (of an outdoor area) is enclosed and still trapping harmful tobacco smoke containing a cocktail of deadly toxins," foundation chief executive Greg Smith said.

"Smokers ... will continue to inflict their deadly second-hand smoke on hospitality workers and on other patrons."

Under the new legislation, individuals can be fined $550 for smoking indoors while publicans and owners can be fined $5550.

Ms Firth said cars could be next in line for smoking bans.

Victorian licensed pubs, clubs, bars and gaming rooms became smokefree yesterday under similar laws.