The Bureau of Meteorology issued the warning on Thursday afternoon, saying the low may develop into a tropical cyclone on Friday morning before crossing the coast near the WA-NT border.
It declared a warning zone from Dundee Beach in the NT to Kalumburu in WA including Wadeye, Kununurra and Wyndham, but not including Kalumburu.
Senior meteorologist Rebecca Patrick told the ABC the system would weaken when it passed over land but regardless of its intensity "it will remain as a deep depression and still bring heavy rainfall".
NT Emergency Service deputy director Robert Evans said evacuations were not being considered and would only come into play if there was "a significant increase" in cyclone category.
The service and local emergency management committees had been preparing for expected heavy rain and flooding since Wednesday, he told the ABC.
Mr Evans urged residents in Wadeye and surrounding areas to clear away loose items from their properties, to clear gutters, check on their neighbours and listen for the next emergency advice.
"Don't enter flood waters. If it is flooded, forget it."
The weather bureau said the tropical low had sustained winds near its centre of 55km/h with wind gusts to 85km/h.
At 4.30pm Darwin time on Thursday it was about 200km west of Darwin and 190km northwest of Wadeye, moving south at 11km/h.
The bureau said gales with gusts to 90km/h may develop overnight between Wyndham and Dundee Beach including Wadeye, and if the system tracks further west then gales may extend to areas west of Wyndham.
"Severe thunderstorms are also possible from this afternoon and during Friday, with heavy rainfall and damaging wind gusts possible," it said.
"Large waves may produce minor flooding in low-lying coastal areas during Friday."
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