The leader of New South Wales, Gladys Berejiklian, says "catastrophic" fire conditions have almost completely razed one Australian community.
She said there was "not much left" of the town of Balmoral, south-west of Sydney, where about 400 people live.
Firefighters are struggling to contain bushfires burning across several states amid dry and hot conditions.
One Balmoral resident, Steve Harrison, shared his dramatic story of surviving the destructive blaze.
"I ran to my [vehicle] but my garden was already on fire here, and the driveway was on fire and the road was on fire, so I realised I couldn't evacuate," the 67-year-old artist told ABC.
"So the day before I had actually built myself a small kiln down the back. A coffin-sized kiln, just big enough for me to crawl inside. I hid in there for half an hour while the fire storm went over."
Since September, Australia's bushfire emergency has killed at least nine people, destroyed hundreds of homes and scorched millions of hectares of land.
On Sunday Australian Prime Minister Scott Morrison apologised for causing "great anxiety" by going on holiday during the mounting crisis.
What is the latest?
A number of small towns have reportedly sustained significant damage this weekend.
Balmoral was hit, for the second time in days, as wind conditions changed around the Green Wattle Creek fire on Saturday.
Residents are currently not allowed to return to the town, amid safety concerns, and an unknown number of homes have been destroyed.
"We want people to have access to their land, to their property, as soon as they can. But it has to be safe," Ms Berejiklian said. "Even if people have lost their properties, they still want to go back to see what's left and if there is anything they can salvage."
No fatalities were reported in the town, but several firefighters were reportedly injured when fighting the blaze.
Elsewhere, at least 86 homes have now been destroyed in the Adelaide Hills area of South Australia - where a 69-year-old man was found dead at his property on Saturday.
As of Sunday night there were still 98 fires burning in New South Wales, including 50 yet to be contained.
Just before 11pm, there are 98 bush and grass fires burning in NSW, 50 are still to be contained. More favourable conditions today have allowed firefighters to work on assessing the damage from the last couple of days and focus on containment options. #nswrfs #nswfires pic.twitter.com/up84cgPwCz— NSW RFS (@NSWRFS) December 22, 2019
Officials said they were hoping to exploit cooler conditions over the coming days to try to contain the fires.
At the scene
Simon Atkinson, BBC News in Balmoral
Burned forest. Scorched patches of ground with the twisted remains of homes. And equally remarkably - properties untouched by the flames. Balmoral is an eerie and desperately sad sight.
We met volunteer firefighter Russell Scholes whose house burned down as he battled to help others.
"I loved my house. But my family are safe. My animals are safe and we helped protect the community and that's more important than the house," he says. "We'll move on and rebuild."
Balmoral Fire Station is awash with that spirit of kindness. As exhausted firefighters continue to tackle spot fires, volunteers busily process donations of food, clothes, toiletries and bedding.
And perhaps more important, emotional support. Even among the stoicism of rural Australia you get a sense that's what is needed here in the days and weeks ahead.
One family of three whose home was destroyed sat in the station's kitchen, struggling to process their loss. Tears of shock and grief came in waves. But there were also tears of gratitude, as the community rallied round them with hugs and warm words - even when there are none.
How are officials responding?
Mr Morrison has apologised for taking a holiday to Hawaii during the crisis.
"I get it that people would have been upset to know that I was holidaying with my family while their families were under great stress," he said on Sunday.
Speaking after a briefing with fire officials, he said he knew Australians were anxious about the fires but insisted that the emergency response was "the best in the world".
Many Australians have accused Scott Morrison's government of inaction on global warming, with criticism growing as a heatwave broke records across the country and worsened the fires.
Although climate change is not the direct cause of bushfires, scientists have long warned that a hotter, drier climate would contribute to Australia's fires becoming more frequent and intense.
Protesters gathered outside his home, before he cut his holiday short, to show their opposition to his policies.
Mr Morrison returned to Australia following the deaths of two volunteer firefighters - Geoffrey Keaton, 32, and Andrew O'Dwyer, 36 - on Thursday.
The two men died when their truck was hit by a falling tree near a fire front, causing it to roll off the road.
"When our volunteers go out there, they do it for so many reasons - but I can't help thinking they do it for love of family," the prime minister said, in tribute. "Family is community, and they were out there defending their communities on that fateful night."
What is driving the fires?
A combination of record temperatures, low humidity and strong winds have worsened the struggle to deal with the bushfires.
"We are in a period of unbelievable drought and some areas haven't seen rain for more than 12 months," NSW Rural Fire Service Inspector Ben Shepherd told the BBC.
"These fires are likely to continue to spread well past Christmas."
Commissioner Shane Fitzsimmons told reporters: "We will not get on top of these fires until we get some decent rain - we have said that for weeks and months."
Rain is forecast in some fire-struck parts of NSW on Tuesday and Wednesday - but another period of dangerously hot weather is expected next week.
Weather officials say no major rainfall is expected in the next two months.
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