Sydney suburban fire threat reduced

A fast-moving grass fire continues to threaten to reach homes in Sydney's suburban west, but an emergency warning has been downgraded.

Residents in Pemulwuy and Greystanes - 30km west of Sydney's CBD - were warned via emergency text messages to seek immediate shelter after the fire ignited east of Prospect Reservoir about 7pm on Tuesday.

It had spread quickly north through the Prospect Hill Pine Forest and was making its way towards suburban homes less than one kilometre away.

The blaze was downgraded to watch-and-act about 8pm after more than 20 fire crews responded to the blaze.

The RFS said some of the fire was in inaccessible areas but conditions were easing.

"Firefighters will work through the night to slow the spread of fire," the fire authority said.

"If you are in the area east of Prospect Reservoir ... monitor the changing conditions. Know what you will do if the fire threatens."

Pemulwuy resident Carmen said people were lining the streets to get a look at the blaze running along a ridge.

"It was a lot of smoke and I could see it from the ridge," she told AAP.

"The smoke and smell have started to dissipate."