The Shanghai-bound MU736 flight, which departed Sydney about 8.30pm on Sunday, experienced an engine fault mid-air and returned about an hour after take-off.
'The moment that we took off, the wing to my left just started making a massive amount of noise and they cleared all the seats, ' a passenger told Nine Network. "At its climbing speed, it will be getting faster and faster and that may have been the trigger to rip off some of that engine casing", he said.
Images posted on social media showed a large hole ripped in the casing of the engine, reportedly an A330.
Crew members noticed the inner cowling of engine one had been ripped open and raised the alarm with the captain.
The plane eventually landed safely back at Sydney Airport where emergency services evacuated all passengers.
"I'm glad we're all safe".
One witness telling Seven news, "We like went up in the air and all of a sudden I heard like a 'dit, dit, dit, dit, dit, dit (shuddering noise)' - and it was really really loud, but no-one really panicked while it sort of smelt like burning".
Passenger Leigh Stewart praised the crew's professionalism during the mid-air drama, saying he felt "very lucky". Oh, I was scared.
Passengers, who had to spend the night in Sydney, told media they smelled burning inside the aircraft.
Audio from the cockpit of a China Eastern Airlines flight that had to return to Sydney Airport implies the pilot misspoke when alerting the tower.
The aircraft was travelling to Shanghai when the damage was discovered.