Forecasters had warned that a tropical low brewing north of Darwin over Christmas could intensify into a category one Boxing Day cyclone.

But the Bureau of Meteorology downgraded the alert late on Saturday, saying the weather system would remain a tropical low.

"It did not spend enough time over water to intensify to tropical cyclone strength," spokeswoman Jude Scott told reporters on Sunday.

The low crossed the coast about 150km southwest of Darwin overnight and is currently moving slowly southeast across the Daly region.

It is expected to travel into the Gulf of Carpentaria on Tuesday towards Queensland where it may form into a cyclone.

"Conditions in the Gulf of Carpentaria are favourable for the potential or the cyclone to form over those warm waters," Ms Scott said.

The bureau said parts of the Top End had been hit by heavy rain and squalls.

Batchelor, 97km south of Darwin, recorded 149mm of rain in the 24 hours to Sunday 9am and 131mm fell at nearby Adelaide River.

Milingimbi, 442km east of Darwin, received 235mm of rain for the same period and nearby Maningrida recorded 211mm.

Darwin CBD recorded 68mm, as the city experienced it coolest Christmas Day on record with a top of 27.3C on Saturday.

"Heavy rainfall and damaging winds will continue to impact the Top End over the next two days," Ms Scott said.

"The monsoon continues to strengthen".

A severe weather warning has been issued for people in Daly, Tiwi, Arnhem and Carpentaria regions.

Heavy rainfall that could lead to flash flooding is expected to continue throughout Sunday across the Arnhem, Daly, Tiwi and northwest Carpentaria districts.

Rainfall of 150 to 250mm and isolated falls to 300mm are possible.

Damaging winds with gusts of up to 100 km/h with monsoonal squalls may develop in coastal areas.

The extreme weather conditions may push further east and south into the Carpentaria and Arnhem District later in the day

A flood watch is also current for parts of the Top End.

Australian Associated Press