Icelandic authorities on Wednesday said they were considering pumping water onto any lava that spews out if a volcanic eruption threatens the evacuated town of Grindavik.
Authorities would use the water to cool and divert the flow of lava to protect the fishing port of 4,000 people on Iceland's southern Reykjanes peninsula.
Residents were ordered out on 11 November after magma shifting under the Earth's crust caused hundreds of earthquakes — a warning of a likely volcanic eruption. Thousands of smaller tremors have shaken the region since.
But in a bulletin on Wednesday evening, the Icelandic meteorological office said the probability of a sudden eruption "is decreasing every day and is considered low" due to declining magma flow and seismic activity.
Authorities said that a state of emergency in place since 11 November would be lifted on Thursday at 1100 GMT.
Grindavik residents will be allowed to return in coming days to collect belongings, a civil protection statement added.
Civil protection and European experts will assess the possibility of "using high volume pumping to cool down the lava to protect the town of Grindavik and important infrastructures," Vidir Reynisson, Iceland's Head of Civil Protection and Emergency Management, told reporters.
The method was used in 1973, when a fissure erupted just 150 meters from the town center on the island of Heimaey, surprising locals at dawn.