Authorities in Victoria have approved the Grand Final to be staged in front of a 50% capacity crowd of 15,000 as COVID-19 restrictions ease in the southern city after a recent outbreak.
City were stripped of home advantage in the semifinals over the weekend due to the restrictions, a decision that angered fans.
"The evolving restrictions have presented ongoing challenges on every front," A-League boss Greg O'Rourke said in a statement on Wednesday. "This announcement means that Melbourne City are deservedly able to play a Grand Final at home in front of a raucous crowd and we hope as many Sydney FC fans as possible will be there."
The A-League's decision follows an outbreak of COVID-19 in Sydney in recent days.
Authorities on Wednesday tightened restrictions on gatherings and movement of people in Sydney for a week amid fears the latest cluster of the highly infectious Delta variant could get out of control.
Sydney FC players rushed to pack their bags late on Tuesday and were moved to hotels outside of COVID "hot zones" in Sydney to avoid fresh curbs on travel to Melbourne.
"It's pretty incredible," Sydney FC midfielder Luke Brattan told radio station SEN.
"I've been in four finals now so usually this week it's all about enjoying the week, the media, the excitement, the training, preparing for such a big game.
"Usually you don't have to worry about these little speed bumps but it is what it is."
Sydney FC, who beat Adelaide United 2-1 in the first semifinal on Saturday, are bidding for a record-extending sixth A-League title.