The fire had initially been reported at 1:52 p.m. Sunday near Crews Road and Sunlit Oaks Court, prompting evacuations from state Highway 152 north to Gilroy Hot Springs and southeast to Prunedale Avenue, fire officials said.
The fire has destroyed one structure and damaged another, but crews "made significant progress" Tuesday in containing spread, CAL FIRE said.
On Tuesday evening, crews worked overnight to build new containment lines, mop up and removed hazardous trees. Officials say the challenging terrain has the potential to create additional fire growth.
Canada Road is closed from Highway 152 to Gilroy Hot Springs, CAL FIRE reports.
Evacuations orders have been lifted for all affected areas and The evacuation center at the Gilroy Senior Center has been closed. Residents needing assistance can contact the American Red Cross at (866) 272-2237.
No injuries have been reported and the cause is still under investigation.
Bay City News contributed to this report.