The fire on Flinders Island, off Tasmania's northeast coast, flared at emergency level on Tuesday morning but was downgraded later in the day to advice level.
It has burned more than 1300 hectares near the coastal communities of Leeka and Pine Scrub, which were on Monday advised to evacuate.
Some power poles, one caravan and two water tanks have been destroyed.
Tasmania Fire Service regional chief Steve Richardson said crews successfully defended three properties on Monday night.
"With around 13mm of rainfall on the fireground ... we're seeing a decrease in fire activity," he said.
"However, it's important the community keep up to date with information to keep safe as conditions are changeable."
The fire has sent smoke as far as Deloraine in northwest mainland Tasmania.
Seven firefighting vehicles were deployed to the island on Monday night by ferry, with dozers and waterbombing aircraft working on the southern edge of the fire.
"We're actively mentoring the conditions in the area and ask that people who evacuated do not return as yet - it is still unsafe in the area," Mr Richardson said.
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