The 10-to-13-foot shark attacked Christine Armstrong, 63, while she was attempting to swim to the wharf and back to a beach near the village of Tathra, a route used during a popular annual swimming event.
Armstrong was some distance from five other swimmers, including her husband, when they saw the shark, Police Inspector Jason Edmunds said.
"The group joined up together and did their best to keep the shark at bay, although it didn't directly attack them," Edmunds told Nine Network television.
The species of the shark was unknown, Edmunds added.
Armstrong's family said in a statement that she had been swimming at the beach for 14 years and had been a trainer at the local volunteer lifeguard club.
"Swimming brought her much joy and many friends," the statement said. "She will be sadly missed by all who loved her, especially by Rob, her husband of 44 years."
Australia has averaged fewer than two fatal attacks per year in recent decades.
The Associated Press contributed to this report.