Mount Agung in eastern Bali was lowered to the second-highest alert level from the highest but officials said public activity was still prohibited within a radius of 7.5 km.
“The volcanic activity at Mount Agung is decreasing…but it must be understood that it still has the potential to erupt,” the National Disaster Mitigation Agency (BNPB) said in a statement.
The volcano last erupted in 1963, killing more than 1,000 people and razing several villages.
Around 133,000 of residents had been evacuated from the slopes of the volcano and put into temporary shelters. Thousands of these evacuees were preparing to return to their homes, the BNPB said.
Indonesia has nearly 130 volcanoes, more than any other country. Many of these show high levels of activity but it can be months before an eruption.