Mr Iemma faced a caucus revolt this morning and Mr Rees had the numbers to overthrow Mr Iemma.

It is understood that there is so much division within the dominant right faction that Mr Iemma appeared to have lost a significant amount of support from once-loyal backers.

The right-wing powerbrokers Eddie Obeid and Joe Tripodi are understoood to have told Mr Iemma that he had lost the support of MPs and would not survive a caucus meeting.

The pressure intensified after outgoing Treasurer Michael Costa set off a series of bombs at his press conference earlier this morning.

Mr Rees is expected to be sworn in as Premier of NSW this afternoon.

Asked as he walked into a Labor caucus meeting of Labor MPs with Carmel Tebbutt whether they were the new leadership team, Mr Rees replied: "Yes."

He emerged from the meeting saying he would not announce his new cabinet until next week.

But he said he would "start work for the people of NSW today".

Mr Rees will speak at a press conference later this afternoon.

The departing team - Morris Iemma and John Watkins - were among the last to walk into the caucus room. They did not comment.

While Mr Iemma's eyes were bloodshot, he appeared to have recovered his composure and looked calm.

About 40 minutes after they went in, Mr Iemma and Mr Watkins emerged together while the meeting continued inside.

Applause could be heard as they left the room.