A defence helicopter's landing light is believed to have started the massive fire threatening homes south of Canberra.
Authorities are warning the 8106-hectare blaze is the most serious Canberra has faced since the deadly 2003 fires.
Spot fires ahead of the main fire were anticipated to reach within one kilometre of the capital's far southern suburb of Banks on Tuesday night.
Residents of the small rural village of Tharwa south of Canberra were told late on Tuesday afternoon it was too late to leave and they should seek shelter.
At 11.15pm on Tuesday, the blaze warning was downgraded to watch and act but residents in Tharwa Village, Boboyan Road, Apollo Road, and Top Naas Road were told to remain vigilant.
The fire in Namadgi National Park was heading east and northeast towards Canberra and growing at a rate of 400 hectares per hour.
Canberra residents in the far southern suburbs were told to activate their bushfire survival plans, with an evacuation centre set up at Erindale College.
Operation Bushfire Relief's Lieutenant General Greg Bilton told reporters on Tuesday evening a defence reconnaissance helicopter was believed to have started the fire.
He said the heat of the landing light likely started a grass fire under the chopper when it landed in the park, with the fire growing rapidly and damaging the craft before it took off.
Lt Gen Bilton said defence would be further investigating the cause of the fire but had ceased use of that type of landing light in the meantime.
Earlier on Tuesday, Caloola Farm manager Ralph Hurst-Meyers was desperately trying to convince three men still on the farm near the blaze to leave as they planned to defend the property.
"It just looks like a dragon, it's unbelievable. It's like a mushroom cloud with a red eye," Mr Hurst-Meyers told AAP on Tuesday.
He said firefighters had told him the farm would become a trap if the fire reached there and said it was too dangerous to defend it.
Mr Hurst-Meyers said he had been in Canberra for the catastrophic 2003 bushfire and he'd learned it wasn't worth holding your ground.
"I know what the beast looks like. I've seen this before. This is a shocker," he said.
ACT Emergency Services Commissioner Georgeina Whelan said ACT Fire and Rescue as well as ACT RFS personnel had all been recalled to help fight the fire.
"The fire is not contained. This fire will burn for several weeks," Ms Whelan said.
She said hot, dry weather and enormous fuel loads were making it difficult to fight the blaze.
"The heat and the erratic winds will only make the situation worse," she said.
Emergency services have 27 vehicles, five helicopters, three small planes, two large air tankers and one very large air tanker fighting the fire.
Defence personnel have been deployed to help build containment lines and assist in operations.
Australian Associated Press
