A fire line is expected to be drawn around the Rodeo-Chediski blaze by Sunday 7 July, when it will be considered fully under control.
The fire blackened 468,000 acres (187,200 hectares) of pine forest, an area twice the size of New York City.
Residents at an evacuation centre in the nearby town of Payson cheered as fire information officers announced that the evacuation order had been lifted for residents of Heber-Overgaard and Forest Lakes.
As the evacuees made their way home along a highway lined with blackened trees, they passed spray-painted signs saying "Welcome home neighbors" and "Thank you firefighters".
But the homes they returned to were often little more than piles of wreckage. Charred pine trees stood around burnt-out cars and remains of buildings.
Arizona fire
Burnt
180,00 hectares (452,000 acres) of pine forest
More than 30,000 evacuees
More than 400 homes destroyed
Preliminary estimates show that 423 structures in the area have been destroyed, mostly homes, according to fire information officer Dave Killebrew.
Residents of the town of Forest Lakes were luckier. Fire crews had managed to rebuff the fire before it could do major damage to homes in the settlement.
"So relieved," said Forest Lakes resident Barbara Purtyman, as she looked around her front yard. "Very, very lucky."
Accused
Meanwhile two firefighters appeared in separate courts on Wednesday, accused of starting two of the largest fires to hit the US this year.
In Flagstaff, Arizona, contract firefighter Leonard Gregg pleaded innocent to starting the Rodeo fire.
Prosecutors allege that Mr Gregg, a 29-year-old member of the Apache tribe, started two fires on the White Mountain Apache reservation on 18 June to ensure work for the summer.
The Rodeo fire wiped out hundreds of millions of dollars worth of timber that the tribe relies on for its income.
In neighbouring Colorado, Forestry Service firefighter Terry Lynn Barton, who was charged on 16 June with starting the Hayman fire near Denver, had her trial put back from its original August date to give the defence more time to prepare.
She has also pleaded not guilty to the charges against her.