The cyclone crossed the Western Australian coast as a category-five system between De Grey and Pardoo about midnight on Thursday, bringing winds of 213km/h.
On Friday morning, it was classified as a category-three system and was expected to maintain cyclone intensity until late at night as it travelled hundreds of kilometres inland towards Telfer and Kunawarritji.
The eye of the cyclone passed close to the iconic Pardoo Roadhouse and staff posted on Facebook that early reports indicated the property had "suffered great damage".
In the regional centre of Port Hedland, west of the storm's centre, locals have emerged from a night-long lockdown after the threat passed.
The cyclone skirted the town of about 16,000 and initial inspections showed it did not cause widespread damage to the key mining port.
WA Department of Fire and Emergency Services incident controller Glenn Hall said people in Port Hedland had been given the all-clear to leave their shelters on Friday morning.
"Thankfully the system hasn't had the effect that we were forecasting in Port Hedland, so that's good news," he told ABC Radio.
Mr Hall said authorities were focused on getting boots on the ground in towns across the region including Marble Bar and Nullagine to work out what help was needed.
Port Hedland mayor Peter Carter earlier said the winds sounded "like a freight train" as the cyclone passed through during the night.
"I think that we were very, very lucky. At the last point, the cyclone moved further north from us," he told ABC TV.
"So I think that we were spared in our community what could have been really bad."
Iron ore port and rail operations were suspended at Australia's busiest and biggest port and ships sent away in preparation for the cyclone's approach.
The Bureau of Meteorology's Dean Narramore said Cyclone Ilsa was generating sustained offshore winds gusts of up to 289km/h at Bedout Island before measurements stopped working.
He said the cyclone might have delivered a new record for sustained wind speeds in Australia and the danger wasn't over for remote communities in the interior of Western Australia and the Northern Territory.
"It's likely to lead to flash and riverine flooding and a lot of the dirt roads in this part of the world becoming unusable and could see some brief isolation of communities and property owners and residents," Mr Narramore said.
The bureau said very destructive winds with gusts of up to 220km/h were hitting near the cyclone centre to the east of Marble Bar on Friday morning.
Heavy and intense rainfall was expected to continue in the cyclone's path, including falls of up to 200mm during the day.
Department of Fire and Emergency Services commissioner Darren Klemm said the weather system would have a significant impact on communities in the warning area.
"All the preparation work that's gone into those remote Aboriginal communities, the mine sites and the town and the pastoral stations is really critical to make sure people are staying safe," he said.
Evacuation centres were opened in South Hedland, Newman, Marble Bar and Nullagine.
Workers and tourists at Eighty Mile Beach caravan park and nearby cattle stations were evacuated, along with non-critical workers from mines sites across the region.
Extra emergency workers, essential supplies and aircraft have been sent to the area.
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