The furious mayor of an area hit worst by Australia's bushfire emergency has demanded answers after the military was blamed for starting a huge blaze, as cooler conditions on Thursday aided fire crews.

One of the biggest and fiercest infernos still blazing, which has a perimeter of more than 300km, was started by the military, a fire service investigation said on Wednesday.

I would have hoped on a day like that which was a dry day, a hot day, with the winds - the Australian military would have known it wasn't a good time to be igniting. Mark Greenhill, Blue Mountains mayor

The Rural Fire Service said that one of more than 100 fires in Australia that have burned since last week began at a Defense Department training area as a result of "live ordnance exercises".

Blue Mountains mayor Mark Greenhill was furious, telling ABC television, "I would have thought the community of the Blue Mountains is owed something."

"I would have hoped on a day like that which was a dry day, a hot day, with the winds - the Australian military would have known it wasn't a good time to be igniting," he said. "The fire has caused great concern to my community, it's done damage to my community and it just shouldn't have happened."

In a statement, Acting Defence Minister George Brandis said the military was cooperating with investigators.

Rural Fire Service commissioner Shane Fitzsimmons said the defence department's actions were obviously an accident.

"It wasn't deliberate; it was a side effect of a routine activity, it would appear, and clearly there was no intention to see fire start up and run as a result of that activity," Fitzsimmons said. "There is no conspiracy here."

The fires have killed one man and destroyed more than 200 homes in New South Wales state over the past week. Sixty-five fires were still burning on Thursday, with 24 out of control, though all emergency warnings had been lifted.

The major wildfire threat had passed on Thursday, as cooler temperatures and calm winds prevailed and hundreds of residents returned to homes they had evacuated earlier.