Landslides have blocked dozens of rivers in Sichuan province, leading to the formation of new lakes, some of which have already engulfed villages.
Officials are particularly worried about the Tangjiashan lake, 3km (2 miles) from the devastated town of Beichuan.
Its water level is rising rapidly and is now only 26 metres away from the top of the landslide barrier.
Officials fear growing water pressure could burst the barrier, causing a torrential flood.
Earth-moving equipment has been airlifted into the region to help troops, who have also brought in explosives to shift debris, state media said.
Thousands of people have already been evacuated from vulnerable areas and an official said another 100,000 would have to be moved, Xinhua news agency reported.
Storms have been forecast for the region, potentially compounding problems as rain water drains into the lakes.
On Monday, China's top decision-making body said that the situation in Sichuan remained grim after what it called the country's "most destructive" tremor since 1949.
While the search for survivors would continue, efforts would now focus on resettlement and long-term reconstruction efforts, the Politburo said.
It called for more medical personnel to be sent to the region and for water, power and telecommunications to be restored as soon as possible.
Officials have said that reconstruction work in the area is set to take at least three years.
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