Volcano Calbuco in southern Chile erupted for the first time since 1972 on 22 April, sending a thick plume of ash and smoke several kilometers into the sky.
Chile's Onemi emergency office declared a red alert following the sudden eruption at around 6pm local time, which occurred about 1,000km south of capital city Santiago.
About 1,500 people were being moved out of the area and an evacuation radius of 20km has been established, authorities said.
"We're going to increase the evacuation zone from 10km to 20km. And we're making a call to the local residents at this time, everyone who lives near the volcano or at this moment is near Calbuco Volcano, within 20km, should evacuate the area and take preventative measures for safety," said Interior Minister Rodrigo Peñailillo.
Authorities said on television that they were concerned about a pyroclastic flow, which is a superheated current of gas and rock that can destroy nearly everything in its path and travel at speeds upwards of 200-300km/h.
Television pictures showed a spectacular mushroom-shaped column billowing into the sky with occasional lightning bolts shooting through. The eruption was seen in towns at least 50km away.
Chile, on the Pacific Ring of Fire, has the second largest chain of volcanoes in the world after Indonesia, including about 500 that are potentially active.