Police have revoked their emergency declaration for an area surrounding the leaking, privately owned 430-megalitre irrigation dam at Talgai, north-west of Warwick on Sunday evening.
The owner of the property found water gushing from a 3.5-metre by 1.5-metre hole in the dam wall and alerted emergency services about 5:00pm on Friday.
Residents within the declaration area were permitted to return home to their properties, but were not allowed to enter via some closed roads.
Police say the closed roads remain under council control and police patrols of closed roads will continue to ensure community safety.
Several nearby properties were evacuated and other residents were told to leave for higher ground, with dangerous downstream flooding predicted to hit low-lying areas.
Engineers said water was being released at a controlled rate, but the dam remained at risk of failing.
Southern Downs Mayor Tracy Dobie said this morning that while the dam had dropped about 25 per cent, authorities were worried about 300 megalitres of water could rush out at once if the wall collapsed.
This afternoon, she said there is still instability in the dam wall.
"The assessment that has been done by the engineers today are two-fold," Ms Dobie said.
"One was to do flood modelling and that's indicated that if that wall did break the water that would go down that valley is about half of a hundred-year event."
"The reason that we are letting those property owners go back is because that flood would not inundate their homes, the one that would be inundated is the one we're not allowing to return home."
"Tomorrow, a bypass channel will be constructed to the southern edge of the dam wall to take the water away from the wall in a controlled manner."
"That will be released down that valley and will contribute to the need for the road closures, because there will be flooding across those roads."
"It will be a controlled release."
Ms Dobie urged residents who did not need to be in the area to stay away.
"The reason why we're keeping those roads closed, the reason why we are not letting that one property owner return to his property is that we are not confident that the wall will hold."
One property owner will not be permitted to move back to their property until the water pressure has been relieved.
Cr Dobie said the area has had a number of irrigation dams crack and give way as this one had done since this heavy rain.
"Our land is pretty dehydrated after several years of extreme drought," she said.
"Landowners, they do know their properties and I'm sure after this, those who hadn't already inspected their dams have been inspecting their dams this weekend."
Residents near the dam spent a second night away from their homes.
Roads remain closed and the area surrounding the dam is cordoned off, with resident not allowed to return home until the threat eases.ABC