Homes in the Blue Mountains, west of Sydney, are no longer at risk after fire crews brought a large bushfire under control, officials say.
Some 260 firefighters have been battling the blaze about 1km (0.6 miles) from the village of Warrimoo.
The New South Wales Rural Fire Service has now downgraded its warning and told residents to remain vigilant.
In October last year, devastating bushfires moved through the Blue Mountains, destroying 196 homes.
"The level of fire activity for the area is low and we're now advising residents to keep an eye on things and monitor the situation," an RFS spokesman told the Australian Associated Press on Saturday.
"There will be plenty of firefighters remaining in the area over the next few days."
He said the improvement in the situation was due to a combination of more favourable conditions and the good work of fire crews.
No property has been damaged, reports say.
The RFS downgraded its alert over the blaze to "advice" level on Saturday after previously treating it as an emergency incident.
Residents in the area had been urged to leave their homes earlier rather than later, but there was no mandatory evacuation.
At its height, the fire forced the temporary closure of the Great Western Highway while a train line running from Sydney into the Blue Mountains was also shut.
Total fire bans have been declared for much of central NSW and for the north of the state. Farmers have been asked to delay harvesting work to avoid sparking a fire.
Firefighters were battling some 43 bush and grass fires across NSW on Saturday.
Temperatures in western Sydney went above 40C (104F) on Friday.
A warning over a grass fire at Coolac, in the Riverina region south-west of Sydney, was also downgraded to "advice" level on Saturday.