The fire, which prompted an evacuation order on Saturday night for residents of North West River and nearby Sheshatshiu, has only moved about 500 metres since Sunday, and has pushed farther away from North West River.
On Monday afternoon, conditions had improved enough for the order to be lifted, although RCMP cautioned that the formerly raging fire still poses a serious threat.
"Although the evacuation order has been lifted at this time, both communities of North West River are Sheshatshiu are still under a evacuation alert," RCMP said in a statement.
'A whole lot better'
Residents have been asked to be patient with travel delays as they drive the regional highway back home.
"We're a whole lot better this morning then we were yesterday morning," Frank Phillips, an official with Newfoundland and Labrador's Department of Natural Resources, told CBC News before the order was lifted.
Two water bombers and a helicopter were leading the firefighting effort on Monday, with crews getting a boost from a shift in wind direction.
"The weather conditions are very favourable for the community," North West River Mayor Ernie McLean told CBC News Monday. He added the forecast included the possibility of rain showers, "which will be a little bit of a help as well."
Police believe more than 200 of the 1,800 residents had defied the order and returned to their homes Sunday.
With the fire less than 40 kilometres north of North West River, McLean says residents had been very worried.
700 in military barracks
"Just the whole process of waiting this out is kind of making people anxious," he told CBC News. "Where are we, and what are we doing? And when is this going to end in terms of us being able to come home?"
About 700 people slept in military barracks in nearby Happy Valley-Goose Bay. Many others are staying with friends and relatives.
Annette Michelin chose to stay in her home, although she admits the situation has been frightening.
"[The fire] worries me, that worries my husband," she said. "My husband works away, but I feel more safe here. I feel more comfortable here. And at least I'm here if anything happened."
Quebec officials sent two water bombers on Sunday to help with the firefighting efforts.
Hot, dry weather since early May has led to numerous fires across Labrador, many of them small. Similar conditions in parts of Newfoundland have led to a province-wide ban on open fires, which is expected to remain in place until rain falls later in the week.
Authorities believe that a lightning strike started the fire that prompted the evacuation order.