On Tuesday Wen Jiabao, the Chinese premier, told a meeting of top officials that handling 35 dozen newly-formed lakes across the earthquake zone was the "most pressing" task.
The biggest danger comes from a lake known as Tangjiashan, close to the town of Beichuan near the earthquake epicentre in Sichuan province.
Water in the lake is rising two metres every day and by Tuesday it was only 23 metres from the lowest level of the barrier, the China Daily quoted a local water management official as saying.
The lake holds enough water to fill 50,000 Olympic-size swimming pools, and if all of it comes gushing out, millions of people could be at risk.
More than 600 engineers and soldiers are working to dig a diversion channel, but they are not expected to complete the task until June 5 at the earliest.
|A landslide has created the Tangjiashan lake|
threatening those downstream [Reuters]
Up to 1.3 million people will have to be relocated if the lake barrier is breached and officials have already started preparing for that contingency, the China Daily reported.
Since the newly-formed lakes are located in remote mountainous regions, they are difficult to access with the heavy moving equipment needed to clear them.
Meanwhile aftershocks are still rumbling through the devastated region, and have destroyed hundreds of thousands more homes.
Most of those homes have already been evacuated, but it adds fear and danger to the difficult task of recovery in the wake of the disaster.
On Tuesday a 5.4 magnitude aftershock injured at least 63 people, six critically.
Another six people were killed by an aftershock in Sichuan on Sunday.
The official death toll from the initial 7.9 magnitude quake has been raised to 67,183, but is almost certain to rise further with more than 20,000 listed as missing.
Tony Cheng, Al Jazeera's correspondent in Beijing, said the government has won praise for its rapid and effective response during the aftermath of the quake.
But the task facing China's leaders is now much greater in terms of finding new homes for the millions whose futures have been destroyed by the quake, he said.
And as the summer heat sets in, concerns rise that disease could spread in the overcrowded tent cities set up to shelter the homeless.
The quake destroyed many hospitals and clinics across Sichuan province, leaving acute shortages of staff and facilities.
In the immediate aftermath, medical services have focused on treating physical injuries and preventing disease outbreaks.
But experts warn that mental trauma could be a hidden toll for many survivors.
Metin Basoglu, head of trauma studies at London's Institute of Psychiatry at King's College, said 80 per cent of the survivors could be expected to suffer short-term effects of post-traumatic stress disorder.
Half will have longer-term problems, which include obsession with the
trauma, nightmares, flashbacks, emotional numbing, loss of interest in life, irritability, memory problems and hyper-vigilance - a state of constant alertness.
"Fear is the most serious problem," Basoglu told the Associated Press.
"Many people will find that their fear of earthquakes interferes with their everyday activities", including sleeping, bathing and even walking into a building."