Officials said the threat had subsided for the moment as water levels at the Oroville Dam, 75 miles (120 kilometers) north of San Francisco, have eased. But people were still being told to stay out of the area.
Several weeks of heavy rains had filled the 770-foot (235-meter) high dam to capacity.
The threat comes not from the dam itself, which the California Department of Water Resources said was not in danger of collapse, but from an emergency spillway that channels off excess water.
But it began eroding, threatening a rupture that would have sent water surging towards cities in the valley below, US media reported.
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Authorities then released 100,000 cubic feet (2,830 cubic meters) of water per second from the main spillway, bringing down the level of reservoir Sunday, the Sacramento Bee newspaper said, citing Department of Water Resources spokesman Doug Carlson.
Although the most pressing threat had passed, the evacuation order remained in place as authorities evaluated the state of the two spillways.
The California National Guard said Monday morning on Facebook that it had alerted its 23,000 members to be ready to deploy.
"Now that there is no more water going over the emergency spillway, though it brings stability to the situation, there are still a lot of unknowns," Butte County Sheriff Kory Honea told a news conference Sunday night.
"We're not at the point yet where we can make decisions about whether or not it is safe to repopulate areas.