Forecasters are predicting a cyclone will form off Western Australia's northern Kimberley coast on Christmas Day.
The Bureau of Meteorology says a tropical low sitting about 295 kilometres north-east of Kalumburu is expected to develop into a category one system as it nears land after sunrise tomorrow.
The bureau predicts it will make landfall between Wyndham and Kalumburu shortly after.
A Blue Alert has been issued for coastal areas from Mitchell Plateau in WA to the Northern Territory border, including the communities of Wyndham, Kalumburu and Troughton Island.
The bureau warns that wind gusts of up to 100 kilometres an hour may develop early on Christmas Day and heavy rain is expected in the north Kimberley over the next two days.
The Territory will also be affected by the system, with strong winds, showers, storms and heavy rainfall forecast for the Darwin Daly area and the northern Victoria River District.
This may lead to localised flooding.
The bureau's Greg Browning says once the system makes landfall, it is expected to revert back to a low and will move back out to sea on Boxing Day.
However, he says it is likely the system will gain more strength as it moves west parallel to the Kimberley coast.
"The main concern is once it does go over water it will again be able to start to re-develop and we expect it to become a tropical cyclone reasonably soon after it goes over water," he said.
"It could have the potential to develop into a much bigger and stronger system when that happens.
"Then there will be an issue of where it tracks after that."
Mr Browning says a second tropical low south of Indonesia could contribute to the system.
"This low that we expect to form into a tropical cyclone will become the dominant system," he said.
"The Indonesian low may interact with this system or the broader monsoon trough once it gets into closer waters over the next few days."
Meanwhile, cloud and rain covering most of central Australia is forecast to clear.
The temperature at Alice Springs is expected to top 30 degrees Celsius on Christmas Day.
The Christmas Eve top temperature was just 22 C degrees.
The bureau says the last December cold snap at Alice Springs was in 2006 when the high on Christmas Eve only reached 20 C degrees.
© ABC 2013
18:04 EDT The weather bureau has urged residents in Queensland's Gulf to remain on cyclone alert as ex-Tropical Cyclone Gillian moves overland.