The fire burned out before midnight, and then crews reignited it to allow vapors in the tank to also burn away.
Lincoln Fire Chief Dave Whitt said the tanker was being filled with water and a small amount of foam. He expected the vapor fire to burn out before dawn.
The fire began late Tuesday as crews were unloading propane at a distribution equipment lot in Lincoln, a city 30 miles north of Sacramento.
Fire crews allowed the tanker to burn itself out after determining that it held less propane than previously thought.
Between 4,000 and 5,000 homes in the city had been evacuated, and more than 6,000 students missed their first days of classes because of the fire.
Officials had worked throughout the day Wednesday in trying to head off the potential failure of the 29,000-gallon tank. Whitt said crews were concerned at the time that a buildup of heat could lead to an explosion that could produce a fireball several hundred yards wide.
It's remains unclear how the fire started.
The Associated Press contributed to this report.