Red-hot lava from the Cumbre Vieja volcano, which has been erupting since September 19, on Monday began sliding down a cliff into the Atlantic Ocean.
Soldiers were deployed to measure air quality in the area and residents of three nearby coastal towns were told to stay inside with doors and windows shut, as wind blew the fumes inland.
But on Tuesday the Canary Islands Volcanic Emergency Plan (Pevolca) lifted the confinement order "after confirming that the arrival of the lava flow did not affect residents," local emergency services said on Twitter.
This is the third time that a lava flow has reached the Atlantic Ocean since the volcano began erupting two months ago, covering large areas with ash.
All flights to and from La Palma's airport were cancelled on Tuesday for the second straight day because of the ash.
Residents of La Palma's capital, Santa Cruz, were on Monday advised to wear high-filtration FFP2 masks outdoors for the first time since the eruption, to protect against high concentrations of sulphur dioxide.
Most of the island of around 85,000 people, part of the Canary Islands archipelago off northwestern Africa, has been unaffected by the eruption, with the lava flow concentrated on the western side.
The molten rock has covered 1,065 hectares (2,630 acres) and destroyed nearly 1,500 buildings, mainly homes, according to Copernicus, the European Union's satellite monitoring service.
Provisional damage was estimated on Friday at nearly 900 million euros ($1 billion), according to the regional government.
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