The 41-year-old mother was with the baby's father when their child was born in Mosman after being stuck in Spit Road traffic at 7am (AEST) on Tuesday.
Paramedics arrived on the scene a few minutes later, a NSW Ambulance Service spokesperson said.
Witnesses say the car had pulled into a nearby service station where paramedics treated the woman.
"I saw ... a bit of commotion around someone in the passenger seat and dad seemed to look quite chuffed," a caller named Peter told Sydney's ABC Radio on Tuesday.
Another caller said the baby boy was with his mother in the front seat covered in "goo".
The mother and baby have since been transferred to hospital.
Have you had a birth experience where things haven't gone to plan?