The raging blaze from the tanker burned out before midnight, but then crews reignited it to allow vapors caught in the tank to also burn away, Lincoln Fire Chief Dave Whitt said.
But he told The Associated Press that the threat of a major explosion no longer existed and an evacuation order for Lincoln was lifted around midnight.
Between 4,000 and 5,000 homes in the northern California city of 40,000 people had been evacuated, and more than 6,000 students missed their first days of classes after the tanker caught fire Tuesday.
"Most of them are en route (home) or are there," he said.
Whitt said the tanker was being filled with water and a small amount of foam. He expected the vapor fire to burn out before dawn.
After preparing to undertake a bold maneuver to drain the propane from the burning car, Whitt said crews opted instead to let the fire burn itself out after determining the car held less propane than previously thought.
"They saw the flames on top get lazier and lazier," he said. "They said, `you know what, this may be out of product.' Sure enough that's exactly what happened."
Officials had worked throughout the day Wednesday in trying to head off the potential failure of the 29,000-gallon tank. Whitt said crews were concerned at the time that a buildup of heat could lead to an explosion that could produce a fireball several hundred yards wide.
An explosion also could throw metal shards up to a mile away. Officials on Tuesday ordered mandatory evacuations within a one-mile radius.
It was unclear how the tanker caught fire in the Northern Propane Energy yard in Lincoln, about 30 miles northeast of the state capital. It was surrounded by trucks, other rail cars and storage tanks containing at least 170,000 gallons of additional propane that Whitt said were at risk as the fire burned. A gas pipeline also runs through the area.
One worker at the rail yard was injured in the initial fire and suffered flash burns but has been released from a hospital.
A similar fire in 1973 in the Arizona town of Kingman killed 11 firefighters and a gas company worker when a rail car carrying a propane tank exploded. The resulting fireball injured more than 100 others and showered the surrounding area with shrapnel. The propane tanker flew a quarter of a mile and its impact dug a crater 10 feet deep.
Whitt, who was the first to respond to the fire, said crews were successful in keeping the tanker cool since it caught fire Tuesday.
"If we didn't put water on tank, and protect integrity of tank, outcome would not have been as positive," he said.
He added the crews used up to 5,000 gallons of water per minute to keep the tank cool.
Earlier, the American Red Cross said 270 people had taken shelter in three evacuation centers.
Leslie Reyes and her husband, a city maintenance worker, spent the night in their van outside the Lincoln Community Center, one of the three shelters. Her oldest son slept outside next to the van while three other children were placed with family and friends.
She said they chose to stay outside because they were not allowed to bring in their 2 1/2-year-old toy rat terrier.
Reyes, 35, said she got a call at home Tuesday from her husband to evacuate. A short time later, an officer came to evacuate their street.
"At that point, I told my kids grab your memorables, pictures, things that are near and dear to your heart," Reyes said.
She said she appreciates the precaution despite the inconvenience. Reyes said she plans to relocate her family to her mother's in Antelope, about 15 miles away.
"Of course I would rather go home but it's better to be safe," Reyes said.
Roza Calderon, who lives with her family about a block away from the propane yard where the tanker was burning, described flames as high as utility lines before she evacuated.
"It was a big flame. It was getting worse," she said.
The 26-year-old accountant said she was staying with her husband, daughter and mother at a hotel in Sacramento.
