Ike hit eastern Texas as a Category 2 hurricane Saturday with winds of 175 km/h and heavy rain before it weakened to a tropical storm later in the day.
The U.S. National Hurricane Center in Miami, issuing an update in the early afternoon, said winds remained near 96 km/h and tornadoes were still a threat.
Stretching 965 kilometres in width, the storm made landfall at the island city of Galveston at 2:10 a.m. local time, flooding thousands of homes in coastal areas.
Scores of roads were washed out, and millions of people in Texas and Louisiana were without power, according to emergency officials.
The storm surge topped out at four metres, lower than forecasters feared.
A woman was killed north of Houston when a tree fell on her home, officials said. Ike left more than 70 people dead in Haiti and killed four in Cuba as it swept through the Caribbean earlier this week.
In Galveston, tens of thousands of residents decided to not evacuate the area, city manager Steven LeBlanc said. Nearly 100 per cent of the population left ahead of Hurricane Rita three years ago.
Fire crews rescued about 300 people who tried to flee the island at the last minute. They were found walking through flooded streets late Friday.
The hurricane drove a wall of water over Galveston and submerged a seawall built more than 100 years ago to protect the city.
About 80 kilometres inland, Ike also battered downtown Houston, shattering windows of several skyscrapers that house some of the world's largest energy companies.
Around 8 a.m. local time Saturday, Ike weakened to a Category 1 storm as it moved inland, 30 kilometres south-southeast of Huntsville, Texas. Its maximum winds slowed to 144 km/h.
The storm has idled more than a fifth of U.S. oil production. Some 4,000 offshore oil rigs dot the Gulf Coast.
U.S. President George W. Bush said his government intends to monitor gasoline prices to make sure there is no price gouging.
Bush said his administration has also suspended Environmental Protection Agency waivers on some reformulated gasoline to make it easier for foreign imports to reach the U.S. market.
"The storm has yet to pass and I know there are people concerned about their lives," Bush said in remarks from the south lawn of the White House after he participated in video conference with Homeland Security Secretary Michael Chertoff and David Paulison, head of the Federal Emergency Management Agency.