Above:"It's like fireballs exploding in the air": One town's mayor describes the Australia bushfires.
Firefighters had gathered at the shore as a last line of defence.
Victoria's state emergency commissioner Andrew Crisp told reporters there were "4,000 people on the beach" at Mallacoota.
Authorities had previously urged people in the region - many of them tourists - to stay put because by Monday it was too late and dangerous to evacuate.
Locals told the BBC they had "bunkered in" as the front approached, raining ash on the beaches.
"It was bloody scary. The sky went red, and ash was flying everywhere," said Zoe Simmons in Batemans Bay.
Hundreds of massive blazes have destroyed millions of hectares in the eastern states of Australia since September.
A "freakish weather event" killed a volunteer firefighter on Sunday, according to the NSW Rural Fire Service (RFS).
He is the third volunteer firefighter to have died.
Samuel McPaul, 28, a newlywed, was expecting his first child. Powerful winds near the NSW-Victoria border - generated by the fires - lifted his 10-tonne truck off the ground and flipped it over, the service said.
Two other firefighters were also injured and suffered burns.
Temperatures exceeded 40C (104F) in every state and territory at the start of the week, with strong winds and lightning strikes bolstering the flames.
Meteorologists say a climate system in the Indian Ocean, known as the dipole, is the main driver behind the extreme heat in Australia.
But much of Australia is also suffering from a record drought.
Residents in the NSW holiday towns of Bermagui and Batemans Bay also fled on Tuesday morning to the waterfront or makeshift evacuation sites near the shore.
"It should have been daylight but it was black like midnight and we could hear the fire roaring," said David Jeffrey, a local business owner.
"We were all terrified for our lives."
"We were all terrified for our lives."
Thousands ready to take to the water if necessary, leaving everything behind.
Government officials called for Australian military support and assistance from U.S. and Canadian fire crews as authorities confirmed two people had died overnight, taking to 12 the total deaths in wildfires since the beginning of October.
Victoria's state premier, Daniel Andrews, said navy ships might be called upon to provide food, water and power to the cut-off townships.
The huge bush fires have destroyed more than 4 million hectares (10 million acres), with new blazes sparked into life almost daily by extremely hot and windy conditions in bushland left tinder dry after a three-year drought.
Fueled by searing temperatures and high winds, more than 200 fires are now burning across the southeastern states of New South Wales and Victoria, threatening several towns and snapping their power, mobile and internet links.
Sydney's water supply was said to be threatened by the fires and ash.
The bush fire crisis has exploded on a scale never experienced in New South Wales.
Three people have been confirmed dead in the past 24 hours, dozens of properties lost and thousands of people are trapped, evacuated to beaches, many forced onto and into the water.
Australia wildfires: Fire truck overrun by bushfire flames
Firefighters in New South Wales were forced to shelter in their truck as it was surrounded by bushfire flames.
Authorities said members of the crew, from Station 509 Wyoming, were safe following the incident.
Because the plume contains heat and moisture, when it hits the stratosphere it can condense and form clouds.
"A pyrocumulonimbus is basically a thunderstorm within the plume of the fire," says Associate Prof Jason Sharples, an expert in extreme fires based at the University of New South Wales (UNSW).
What can they do?
When the storm is formed, it means the fire below will be big, fast and very dangerous.
"That means it's big enough to overcome any other conditions," says UNSW scientist Prof Jason Evans.
Australian experts have tallied close to 60 such events since 2001.
A record 18 were recorded in March this year when fires burned in the state of Victoria. They were also seen during fires in Canberra in 2003, when a fire tornado was recorded.
"There's been a crazy increase in the frequency of these events," says Prof Evans.