Isaac weakened to a tropical storm this afternoon and a gradual weakening is forecast during the next 48 hours as it continues to move farther inland, the US National Hurricane Center (NHC) said in its latest bulletin.
The centre of the storm was located about 80 km west-southwest of New Orleans, Louisiana, packing winds of about 110 km per hour, the NHC said.
Isaac drove water over the top of a levee on the outskirts of New Orleans today, but the multibillion-dollar barriers built to protect the city itself after the 2005 Katrina disaster were not breached, officials said.
The slow-moving but powerful storm, which was earlier a Category 1 hurricane, was felt along the Gulf Coast, threatening to flood towns in Mississippi and Louisiana with storm surges of up to 3.7m (12ft) and top sustained winds up to 120km/h (75m/h).
"The federal levee system . . . is fine," New Orleans Mayor Mitchell Landrieu told local radio. "There are no risks. It is holding exactly as we expected it to and is performing exactly as it should. There are no people on rooftops from flooding that even approximates what happened during Katrina," he said.
Police and National Guard units patrolled the nearly empty downtown quarter of the port city, which normally bustles with tourists drawn to its jazz bars, Creole cuisine and French colonial architecture. Tree limbs and street signs littered the streets and power was cut intermittently throughout the city, but authorities reported no security problems.
"Thus far it's been pretty easy," said Captain Jeremy Falanga of the Louisiana National Guard, who was stationed with troopers in front of the city's convention centre. "Not many people are outside, it's pretty buttoned up."
Isaac was wobbling northwestward near 10km/h, a slow pace that increases the threat of rain-induced flooding.
In low-lying Plaquemines Parish, which stretches southeast from New Orleans, emergency officials reported the overtopping of an 2.4m-high levee between the Braithwaite and White Ditch districts.
Plaquemines Parish is cut in two lengthwise by the Mississippi River as it flows to the Gulf of Mexico. Much of it lies outside the greater New Orleans levee system, and construction projects to bolster protection are not complete.
It was not immediately clear how many people may have been stranded in the area, as driving rain and hurricane-force winds prevented a full-scale search.
Isaac was the first test for the $14.5 billion (€11.5 billion) flood defence system of walls, floodgates, levees and pumps built after Katrina's storm surge.
Katrina left large parts of New Orleans swamped and killed 1,800 people, in the costliest natural disaster in US history. Hundreds in and around New Orleans drowned in 2005 and many survivors waited for days to be plucked from their rooftops by helicopters.
The city also endured days of deadly disorder and widespread looting.
Isaac killed at least 23 people and caused significant flooding and damage in Haiti and the Dominican Republic before skirting the southern tip of Florida on Sunday and heading across the warm waters of the Gulf of Mexico.
It spared Tampa, Florida, where the Republican National Convention is being held. But it forced party leaders to reshuffle the schedule and tone down what some might have seen as excess celebration about Mitt Romney's presidential nomination as Gulf Coast residents faced danger.
Oil production in the US Gulf of Mexico nearly ground to a halt and ports, and coastal refineries curtailed operations. Energy companies along the Gulf Coast refining centre braced for the storm's impact by shuttering some plants and running others at reduced rates ahead of Isaac's landfall.
Reuters