A cyclone warning is current for remote communities north and east of Darwin as a tropical low develops off the Top End coast.
The weather bureau expects a category one cyclone to form early on Christmas morning, before intensifying into a category two system later in the day.
Residents in an area stretching from from Cape Fourcroy to Milingimbi, including the Tiwi Islands, Cape Don and Croker Island are being warned to prepare for an impending cyclone.
The weather bureau predicts a category one system will form in the area around 4:00am (ACST) tomorrow and it is then expected to strengthen into a category 2 cyclone around 10:00pm on Christmas night.
The bureau says the system should remain slow moving north of the coast over the next 24 hours, before heading south.
A cyclone watch is current from Dundee Beach to Nhulunbuy, including Darwin.
Disaster meetings are being held in remote Aboriginal communities north of Darwin and in Arnhem Land.
Emergency Services director Peter Davies says many Top End communities could be cut off if a cyclone hits and authorities are making sure they have plenty of supplies.
"All the communities have stocks of food and in fact we've been checking that over the last couple of days," he said.
"It really does depend where the cyclone crosses the coast and what damage, if any, it does."
In the meantime, residents are watching and waiting to see what path the cyclone will take.
Meteorologist Michael Foley says conditions could change.
"It's really just drifting around that part of the Arafura Sea," he said.
He says the system is still more than a day away from Darwin.
The Top End has been preparing for a cyclone to form off the Northern Territory coast all week.
Darwin residents have added tinned food, batteries and torches to their Christmas shopping lists, with many shops fast selling out of emergency supplies.
The Government says it is well prepared to look after Darwin's homeless population if a cyclone hits the city.
© ABC 2011
18:22 EST This year's Northern Territory Budget appears to be a straightforward one, with no real surprises or significant announcements for the bush.