More than 100 people have been arrested in Newcastle for allegedly defying directions by New South Wales Police during an anti-fossil fuel protest at the world's largest coal port.

Dozens of protesters on kayaks and small water craft paddled out on Newcastle Harbour on Sunday morning.

Standing on the beach, a police officer using a loud speaker told those gathered on the sand they could be breaking the law if they entered the shipping channel. 

NSW Police said just after 10am on Sunday a large group of people entered the shipping channel and interfered with the movement of vessels.

As a result police said 138 people had been arrested after refusing to comply with a direction to move away from the channel.

Thousands of people have gathered in Newcastle over the past few days for what activism group Rising Tide has called "the people's blockade" of the world's largest coal port.

The police operation on the harbour is continuing and police aren't ruling out further arrests.

"NSW Police will adopt a zero-tolerance approach to actions which threaten public safety and the safe passage of vessels," a statement said.

Rising Tide has declared the protest action successful, claiming the paddle-out forced a bulk carrier to turn around and not enter the port. 

The Port Authority has confirmed shipping movements in and out of the Port of Newcastle have been temporarily paused.

"In consultation with NSW Police and stakeholders a risk-based decision has been made to temporarily pause shipping," a spokesperson said in a statement.

"The protest activity has compromised the safety of the shipping channel and led to an unacceptable potential risk to public safety, the port and the environment."

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