Fire crews and water-dumping helicopters brought in from the United States saved the coastal village of Fisherman's Paradise, 120 miles south of Sydney, from fast-moving flames.
"For now, the peak is over," New South Wales fire chief Phil Koperberg said of the emergency, which has burned 170 homes and razed more than 1.2 million acres of forest and farmland.
Wildlife officials estimate thousands of native animals, including koalas, have been killed or injured in the fires.
However, some bushland already has begun to regenerate.
Officials said green shoots were sprouting from blackened trees and bushes in the 40,000-acre Royal National Park, on Sydney's southern outskirts. It is the world's second-oldest national park, after Yellowstone in the United States.
Australia's forests are dominated by eucalyptus and other oil-based trees and plants that burn easily, but grow back quickly after fires.
"Every bit of burning bush, twig, branch, whatever, has to be detected and...completely suppressed," Koperberg said.
More than half the 100 blazes that have burned since Dec. 24 were deliberately lit.
Police said Tuesday they had arrested 28 people, many of them children and teen-agers, for allegedly starting blazes.
John Laycock, who is heading a police investigation into how the fires started, said other alleged arsonists would be hunted down.
"We will be unrelenting in our efforts to put them before the courts," he said.
The biggest wildfires still burning were in the Shoalhaven region, south of Sydney. As many as 2,000 people were ordered to evacuate several beachside towns on Monday.
By Tuesday morning, some fire fronts changed direction because of shifting winds and many people returned to their homes.
By sunset, firefighters had contained one major blaze and allowed about 200 residents and vacationers from the hamlet of Fisherman's Paradise to return as well. No homes were lost, said regional fire official, John Cullen.
Many evacuees spent Monday night camped in a nearby fairground. They recounted how police squad cars drove along their streets ordering residents to leave as the flames advanced.
"We were only able to grab photographs, important documents, the dog, the cat and the family," said resident Julie Bayliff. "There was lots of smoke and the winds were fierce."
On Tuesday, three huge water-dumping helicopters, leased from Erickson Air-Crane Inc. of Central Point, Ore., were at the scene.
One has played a major role in quelling fires across New South Wales since late December. The two others arrived from the United States on Monday.
The choppers, known as heli-tankers, can suck 3,500 gallons of water into their tanks in less than a minute and dump it on the flames.
Brief rain doused many other blazes nearer to Sydney on Monday
When the crisis peaked last week, thick smoke shrouded the city of 4 million and some fires entered suburban parkland.
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