Christmas revellers were pepper sprayed and shoved to the ground while two officers were hit by bottles.
Police were called to Little Bay, south of Maroubra, at about 3pm on Monday following reports of the gathering in an alcohol-free zone.
Videos from the scene posted online show dozens of people in Santa hats drinking, singing and dancing to loud music.
One man wearing a panda head and carrying a boxed-wine bladder, or goon bag, holds up his middle finger as police officers approach the booing crowd.
Three people who were arrested were being interviewed by detectives after two officers were struck with bottles, a police spokeswoman told AAP.
One man who was at the party but didn't want to be named told AAP that details of the event were spread through Facebook.
He said police used pepper spray as people were attempting to leave.
One video posted publicly on Facebook shows the aftermath of the party in a street as police try to move people on.
The footage shows at least four women being pushed to the ground by police, including two who land on the road, as the crowd throws objects at officers.
Revellers were dispersed on foot and by bus and by 6pm the beach had cleared, a police spokeswoman said.
The spokeswoman was not able to comment on the tactics used by officers.
Some social media users accused police of being "unnecessarily violent" and going "way too far" in their response.
Last week, Eastern Beaches police also took to Facebook to post a warning about alcohol-free zones at all local beaches.
Randwick City Council had introduced tighter alcohol restrictions for Christmas and anyone who was caught risked a maximum fine of $2200, police said.
