Services on Scotland's busiest rail line will also experience disruption until Thursday morning after the blaze at Brightons, near Falkirk.
It is expected that the area will be sealed off until at least 0530 BST on Thursday as firefighters continue to cool down the cylinder.
Almost 150 houses were evacuated after the fire was discovered at Brightons Timber Yard in the town's Redding Road.
Residents were initially taken to the nearby Grange Community Centre.
Falkirk Council set up rest centres and arranged bed and breakfast accommodation for vulnerable people such as the elderly.
Other evacuees stayed with family and friends.
Assistant Firemaster Alasdair MacInnes said those within a 200-metre range of the yard were evacuated "purely as a precaution".
"When we extinguished the fire we discovered the gas cylinder.
Cordoned off
"When unstable gas is subjected to heat it starts to decompose so we will continue to cool the cylinder to prevent it from rupturing, when it would have the potential of causing a lot of debris in the area," he explained.
Firefighters will remain at the scene until the cylinder, which can not be moved for safety reasons, is safe.
An investigation has been launched into the cause of the fire, which is as yet unknown.
Roads near the industrial estate have also been cordoned off.
And rail services passing through Brightons on the main Edinburgh to Glasgow lines, and the Edinburgh to Falkirk High line, have been suspended.
A ScotRail spokeswoman said a half-hourly rail service would operate between Glasgow and Edinburgh.
ScotRail said trains from Glasgow Queen Street will terminate at Falkirk Grahamston, while services from Edinburgh will terminate at Polmont.
A bus shuttle will run between the stations.
The 50-minute journey between Scotland's two biggest cities was expected to take an hour and 20 minutes.
Road closures
Services between Edinburgh to Stirling and Dunblane have also been disrupted.
Central Scotland's Police Chief Inspector, Alan Ruthven, said: "Public safety is, as always, our number one priority.
"While we appreciate that the road closures implemented, and the suspension of rail services in the area, will cause a certain amount of inconvenience, we hope the public will understand and co-operate while we deal with the situation."
Falkirk Council has set up two helplines for the public, which can be contacted on 01324 503857 or 01324 503858.