The plan was audacious and built on a hard lesson. Japanese midget submarines had failed completely at Pearl Harbor, so the navy tried again with a better-defended target and crews trained to slip in unseen. On the night of 31 May, three Ko-hyoteki midgets — M-14, M-21, and M-24, each crewed by two men — were launched from larger submarines waiting offshore and made for the harbour mouth. Sydney's defences were a patchwork. The anti-submarine boom net stretched across the harbour but stood unfinished, with four-hundred-metre gaps still open on either side for want of materials. The outer detection loops were switched off or broken. M-24 crossed the inner loop undetected and simply followed a Manly ferry through the gap in the net, riding in the wake of ordinary harbour traffic into the heart of the anchorage.

What followed was less a battle than a slow, costly failure to believe what was happening. When a searchlight on Chicago caught M-24 close alongside, the cruiser opened fire, but its guns could not depress low enough; shells skipped off the water and slammed into Fort Denison's old tower. The first midget, M-14, fouled the net and its crew scuttled it. M-21 was depth-charged but survived, settling on the harbour floor to wait. Through it all, the senior officers ashore were slow to act. Rear Admiral Muirhead-Gould had been hosting a dinner party, and when he finally went aboard the patrol boat Lolita near midnight he scolded its crew for their reports, asking sarcastically whether the enemy captain had a black beard so he might meet him. The floodlights at Garden Island stayed lit, silhouetting the very ships the midgets had come to kill. Only when Kuttabul broke apart did the disbelief end.

A week later the harbour's attackers struck from the sea. In the small hours of 8 June, two of the large Japanese submarines that had carried the midgets surfaced off the coast and opened fire. I-24 lobbed ten shells toward the Harbour Bridge; most fell into the Eastern Suburbs, and most failed to explode — many were armour-piercing rounds meant for steel hulls, useless against brick, some so old they turned out to be surplus British shells from the First World War. I-21 then shelled Newcastle to the north, aiming for the BHP steelworks, scattering thirty-four rounds with little effect. From Newcastle, Fort Scratchley fired back — the only time an Australian shore fortification has ever fired on an enemy warship in war. One death came of that night's defence: a young American pilot, Lieutenant George Cantello of the 41st Pursuit Squadron, disobeyed orders, took off from Bankstown to hunt the raider, and was killed when his Airacobra crashed at Hammondville. He was 27.

The damage was slight; the fear was not. Sydney families fled west, and house prices fell in the Eastern Suburbs while rising beyond the Blue Mountains. But the most striking thing the attack left behind was a gesture of grace. When the bodies of the four Japanese midget crewmen were recovered, Muirhead-Gould — the same officer mocked for his slowness — ordered them cremated with full naval honours, their coffins draped in the Japanese flag. He was criticised for it and defended himself simply: he respected the courage of the four men, whatever flag they served. Their ashes were returned to Japan, where thousands gathered to receive them. The midget M-24 vanished after the attack and stayed lost for sixty-four years, until amateur scuba divers found her wreck off the northern beaches in 2006, her two-man crew still aboard. Today a submarine rebuilt from the recovered midgets sits in the Australian War Memorial, beside the salvaged wheelhouse of the little ferry that took the worst of that night.