At least five deaths were blamed on Isabel, downgraded from a hurricane on Thursday night.
After cutting a path of destruction through the North Carolina and Virginia shorelines with winds of up to 160 kph, the storm travelled northwest toward Pennsylvania.
The storm's centre was moving over West Virginia on Friday morning with maximum sustained winds of 80 kph.
The federal government, closed on Thursday as the storm closed in, was to close again on Friday as flooding, power outages and downed trees paralysed the mid-Atlantic region.
Capital shuts down
Most of Congress left town ahead of the storm. The capital's Metro subway and bus system closed and Amtrak halted virtually all train service south of Washington.
Officials reported two tornado sightings near Emporia and Norfolk, in south-eastern Virginia.
In Virginia, one person died in a traffic accident caused by hydroplaning in heavy rain on Interstate 95 in Richmond.
The storm also killed a utility repairman in North Carolina while attempting to restore power in coastal Carteret County. More than 350,000 people were without power in the state.
Damage in the state included thousands of fallen trees, flooding and structural damage to houses, emergency management officials said. In Manteo, on North Carolina's Outer Banks, many trees were felled or snapped in half by the storm and streets were blocked by fallen trees and utility lines.
US President George Bush declared parts of Virginia and North Carolina disaster areas.
Isabel peaked with sustained winds of 160 kph as it approached the Outer Banks islands of North Carolina. Its eye came ashore near Ocracoke Island at midday (1600 GMT).
In all, at least 2.7 million homes and businesses had lost power and nearly a quarter of a million people were forced from their homes as Isabel sent a storm surge of up to 3.3m into the North Carolina and Virginia coasts.
US President George Bush declared parts of both Virginia and North Carolina disaster areas.
In the nation's capital and its surrounding suburbs almost 300,000 people were without power. "Unfortunately, we expect those numbers to keep going up through the night," a PEPCO utility spokesman said.
It was too early to give precise damage assessments, but anecdotal evidence of widespread and costly damage was mounting. "We have trees on houses everywhere. We have roofs that have been blown off," said JD Brickhouse, a manager from Tyrell County, North Carolina.
The Consumer Federation of America estimated the storm would bring at least 20,000 wind damage claims totalling over $500 million, plus many more federal flood insurance claims.