During the night of 29/30 August, Brigadier Potts began to disengage his forces and retreat up through the Kokoda Gap. Early in the evening the spent 39th Battalion retreated up the trail followed by the ineffective 53rd Battalion. The 2/14th pulled back to the Isurava Rest House and was ordered to make a fighting withdrawal against any Japanese pursuit, while the 2/16th was ordered to set up farther to the rear in Alola and act as a rearguard for 2/14th as that battalion passed through its lines. The 2/16th was to be the last out of the area. But unknown to the Australians, Maj. Gen. Horii had also adjusted his forces and turned to the Yazawa Detachment (two battalions of the 41st Infantry Regiment) to continue the attack against the weakened Australians.

By the end of the fourth day the Australians were in full retreat back toward the gap in the Owen Stanleys, having managed to extricate the bulk of their forces. Their next stand would be on the southern slope of the Owen Stanley Mountains. Maj. Gen. Horii assigned the 41st Regiment to lead the pursuit, confident that once the gap was reached it would be a simple matter to descend the other side and capture Port Moresby.