The College Lake Dam exceeded its capacity after up to 6in (15cm) of rain fell on Thursday evening, Lynchburg Water Resources Department said.
City crews inspect the dam weekly because of its age.
Heavy rain has caused College Lake Dam, around a mile from the city, to fill to near capacity.
"The worst case scenario if that dam does breach, officials are anxious it might, is that water would go surging downhill into Lynchburg and it could drown that city in 17 feet of water in about 7 minutes". The city knew the dam couldn't handle 2 feet of rain, the maximum it was supposed to be able to cope with, Perrow says.
The dam was deemed intact Friday morning, CNN reported, although water has continued to cascade over the dam and into Blackwater Creek, which is two miles from downtown Lynchburg.
"Although water levels have decreased, the threat for dam failure continues", and emergency personnel will check for signs of structural failure, the weather service said Friday morning.
A flash flood warning is now in place and 80,000 people have been ordered to move to higher ground immediately.
A flash-flood watch was in effect through 6 p.m. Friday in Lynchburg, with 1 to 3 more inches of rain expected.
Officials have warned residents not to drive down flooded streets, adding that the floodwater may contain debris. They have been advised not to go home for at least 24 hours.
Water damage restoration and cleaning services have reported being inundated with calls for help from Lynchburg and surrounding area residents who have already returned to their homes.
Lynchburg Department of Emergency Services officials said that because the possible breach of the College Lake Dam, 124 residences are being evacuated.