NT holiday village Dundee Beach was postponed by cyclone warning, but still expects severe weather until Christmas Day

The cyclone warning for the northwestern Top End has been canceled, with the tropical low near Darwin no longer expected to reach Category 1 cyclone strength.

Forecasters had predicted that the system, which developed near the Tiwi Islands on Saturday, could intensify into another Christmas Day cyclone on Sunday.

Authorities warned people in Dundee Beach, south of Darwin, to prepare for the cyclone to cross the coast near the town on Sunday afternoon.

The warning was canceled by the Bureau of Meteorology NT (BOM) on Saturday night.

The agency said the storm was to cross the coast south of Dundee Beach as a tropical low overnight and move over the Top End Sunday and Monday.

It is expected to reach the Gulf of Carpentaria on Tuesday, where it may strengthen again.

Heavy rain and strong winds are still forecast over the Top End on Sunday.

A severe weather warning is still in place for much of the Top End from Wadeye to Galiwinku along the coast and inland to Katherine.

The warning also applies to Darwin and the Tiwi Islands.

Heavy rain and lightning floods have been warned in the warning zone, with drops of up to 300 millimeters possible in some areas.

An aerial view of a small resort town on the beach
Dundee Beach is home to a few hundred locals, and holidaymakers from Darwin are also visiting this weekend.(Delivered: Paul Thomsen)

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