Isaac's top wind speeds rated it as a weak Category 1 storm, far less powerful than Katrina, which caused at least $81 billion in damage and was rated as the most powerful type of storm at Category 5.
At 200 miles wide, Isaac made initial landfall Tuesday evening before moving back into the Gulf of Mexico. Isaac's center remained over water, where it was almost stationary before making landfall again this morning.
The greatest concern was an expected storm surge of between six and 12 feet off the Louisiana and Mississippi coasts, four to eight feet along the Alabama coast and three to six feet on the Florida Panhandle, according to the Hurricane Center located in Miami.
A storm surge of eight feet was reported at Shell Beach, La. and in Waveland, Miss., according to the Hurricane Center late Tuesday.
In Mississippi, highway U.S. 90 was closed in sections by storm surge flooding. At one spot in Biloxi, a foot of water covered the in-town highway for a couple of blocks before high tide.
Tornado warnings swarmed the state throughout the morning as 55 mile per hour gusts hit the region.
The highest wind gust was recorded at 113 miles an hour overnight in Belle Chasse, Plaquemines Parish, La.
Thursday night into Saturday, Isaac is expected to move into the Mississippi Valley and, eventually, into Illinois and Indiana with possibly six inches of rain for the drought-stricken Midwest.
While traffic was nearly nonexistent Tuesday night, a few French Quarter bars remained open and filled with locals in New Orleans. At Lafitte's Blacksmith Shop -- the 150-year-old dive at the end of Bourbon Street -- Chris LaRue recommended the four staples of hurricane preparedness: "water, canned food, candles and booze."
"We're going to have some water to clean up," said LaRue. "But this kind of wind is nothing."
In advance of the storm, Louisiana set up shelters and stockpiled more than a million packaged meals, 1.4 million bottles of water and 17,000 tarps.
Since the levees failed in Katrina seven years ago, more than $14 billion has been spent on the 133 miles of floodwalls, spillways, gates and pumps surrounding New Orleans.
ABC News' Max Golembo and The Associated Press contributed to this report.