The Waratahs were "gutted", following their heartbreaking 21-25 loss to the defending Super Rugby champion Reds through a last gasp try from opposition wing Dom Shipperley in Sydney on Saturday.

Despite losing to their arch rivals at home for the first time since 2003, Waratahs head coach Michael Foley was quick to praise the character and effort of his team, in what was another physical, neck and neck encounter, indicative of the 130 year rivalry between the states. 

"I think the Reds would feel pretty lucky right now," Foley said.

"You can't afford to play a 35 minute half. We got ourselves in a situation to win the game. But fatigue creeps in and affects the decision making process. We'll work on that as a team.

"I am very proud of all the players out there. They showed a lot of character. We were a bit loose in the ruck to start with but it got better as the game went on. We had to play a lot from our own half in the first half, it took a lot of courage to stick at it and build on it like that in the second half."

There were still plenty of promising signs for the home team, with a number of standout performances.

The incisive running of new recruit Sarel Pretorius earned him man of the match honours, and Chris Alcock, Tatafu Polota-Nau, Brackin Karauria-Henry and Tom Kingston also had strong outings.

"We have to deal with the disappointment, we need to move on quickly for a six day turnaround. There were enough positives in the game for us to take forward in to next week."

The Waratahs will now face the Melbourne Rebels in Melbourne in round two next Friday.