Shelly Beach is the entry point for Cabbage Tree Bay, a 20-hectare no-take aquatic reserve declared in 2002 that stretches from the southern end of Manly Beach around Fairy Bower to the tip of the Shelly headland, and it is by a wide margin the most dived and snorkelled patch of water in New South Wales. The bay faces north-west, so the prevailing southerly swell passes it by, and the beach is a small crescent of coarse sand with a kiosk, a car park and a headland walk above it. The dive begins over white sand and seagrass at 2–3 m and follows a reef of small tumbled boulders and flat ledges around the headland, deepening gradually to 7–8 m and then 10–12 m; off the point, experienced divers can push north-west onto a deeper, more broken reef at 14–16 m and the outer bommie.

Michael McFadyen, writing from a lifetime of southern-Sydney sponge diving, found the reef itself dull – no sponges, no gorgonians, no sea tulips – and that is fair: Shelly is a fish dive, not a scenery dive. Since protection, more than 160 fish species have been recorded and John Sear's iNaturalist survey lists over 360 species of all kinds. Blue groper the size of labradors follow divers; wobbegongs lie in every second gutter; Port Jackson sharks pile up under the ledges from July to September; dusky whalers, small and harmless, have summered here in groups of up to twenty since 2003; giant cuttlefish court in the kelp in winter; eagle rays, fiddler rays and bull rays cross the sand; kingfish, salmon and bonito hunt the schools of yellowtail; octopus, squid and nudibranchs fill the cracks; and each autumn the East Australian Current brings juvenile tropical fish that shelter in the boulders until the water cools.

Weedy sea dragons, once reliable in 'Weedyland' at the northern end of the bay, all but vanished after the March 2022 swells and are now a rare treat. It is the standard Open Water training site for every Manly operator, a superb night dive, and busy at all hours; the price of the fish life is crowds, a full car park by 8 am and snorkellers overhead. Shelly suits everyone from first-timers to macro photographers, and it is the reference against which the rest of Sydney's shore diving is judged.

From Manly Wharf walk 1.2 km along the Marine Parade promenade past Fairy Bower to Shelly Beach (12–15 minutes; the wharf is 20 minutes by ferry from Circular Quay), or drive via Bower Street to the two-level Shelly Beach car park (paid, roughly $8/hour, full by 8 am on weekends) or free 2-hour street parking further up Bower Street. Gear up at the car park or on the promenade and walk 50–100 m down the ramp beside the kiosk onto the sand. Enter at the top (northern) end of the beach and swim out on the surface 30–50 m before descending.

Exit back onto the beach; in surge the sand is the only safe exit.

Cabbage Tree Bay faces north-west and is sheltered from the prevailing southerly swell, but a north-easterly or easterly swell over about 1 m wraps around the Shelly headland and produces surge along the reef and a shore break on the beach; Fairy Bower's western side then becomes the fallback. Southerly and westerly winds give the flattest, clearest water (10–15 m), and visibility drops to 3–5 m after heavy rain or a run of north-easters. Tide matters little except that the shallow reef is easier on the top half.

Early morning is best on weekends before the car park fills and the bay fills with snorkellers; night dives are excellent.

From the northern end of the beach descend in 2–3 m and follow the reef with it on your right, north-west then north, past small boulders and flat ledges into 7–8 m and out toward the point at 10–12 m (confident divers can continue north-west onto the deeper reef at 14–16 m). Turn at half air or 25 minutes and come back with the reef on your left, finishing over the sand and seagrass at 3–5 m where the blue groper and dusky whalers patrol. Surface only close to the beach because of snorkellers and the occasional boat.

Dive Centre Manly – guided shore dives daily (morning, afternoon and night) and Open Water courses; Pro Dive Manly – guided shore dives and courses most days; Sydney Dive Charters – guided shore dives with Manly Wharf pick-up; Frog Dive, Abyss, Dive 2000 and Plunge Diving on courses and club nights.