As many as four thousand people are trapped on the foreshore of the encircled seaside town of Mallacoota, as smoke turned day to night and the authorities said nearby fires were causing extreme thunderstorms and "ember attacks".
"It should have been daylight but it was black like midnight and we could hear the fire roaring", David Jeffrey, a business owner, said.
On Sunday, after numerous fires began in the larger East Gippsland region, authorities urged residents and vacationers to evacuate, warning that "it is not possible to provide support and aid to all the visitors" in the area.
Robert Phillips, co-owner of a Mallacoota supermarket, told Reuters he was sheltering around 45 people in his store, while others had headed to the town's main wharf.
"We are naturally very concerned about communities that have become isolated and to get an appreciation about other losses there could be we'll be putting helicopters up doing reconnaissance flights", he said.
Many residents said on social media said that they were wearing life jackets if they needed to seek refuge in the water to escape fires.
The ocean is a "last resort option" according to Victoria's emergency management agency.
"Originally I looked at some of the houses".
In New South Wales coast too, similar warnings were made that many "dangerous" fires are spreading rapidly and people in the region should take shelter on beaches if necessary.
The sun should have shone through early this morning however for people who evacuated to the wharf, it was almost pitch black until 9am. "It is pitch black, it is quite scary in that community, the community right now is under threat but we will hold our line and they will be protected". Do not be in their path.
Local media showed images of water bombers flying over neighbourhoods, and families hosing down their homes in the hope of halting the fire's spread.
Thousands of Australians were forced to flee to beaches on Tuesday as wildfires continued to blaze in New South Wales and Victoria. Nearly four million hectares of forest and bushland have been destroyed in New South Wales alone. Weather conditions are expected to improve in the next 24 hours - meaning cooler temperatures and lower winds - but will worsen again by the end of the week, bringing risky fire conditions, according to CNN meteorologists.
The crisis has focused attention on climate change - which scientists say is creating a longer and more intense bushfire season - and sparked street protests calling for immediate action to tackle global warming.
Prime Minister Scott Morrison said significant firefighting efforts would continue for weeks "and I fear, in the months to come".
Fireworks explode near the Sydney Opera House as part of new year celebrations on Sydney Harbour on Tuesday.