Sunny race in suburbs of Sydney (6)
I believe the answer is:
smiley
'sunny' is the definition.
'race in suburbs of sydney' is the wordplay.
'race' becomes 'mile' (**).
'in' is an insertion indicator.
'suburbs of' suggests removing the centre (suburbs are the edges of a city).
'sydney' with its middle taken out is 'sy'.
'mile' placed within 'sy' is 'SMILEY'.
(Other definitions for smiley that I've seen before include "sounds cheerful" , "Cheerful emoticon" , "Spymaster" , "Grinning face symbol" .)