The volcano started erupting at 10:30 local time (16:30 GMT) and has been spewing ash in the municipality of San Miguel. It sent a strong hot ash plume approximately five kilometres high into the air that forced hurried evacuations in the area.
"The evacuations began almost right after the explosion," civil protection official Armando Vividor told Reuters, adding that some 5,000 people lived around the volcano.
Though there were no immediate reports of injuries in the San Miguel region, thousands of people are believed to have been moved out of their houses.
"We are not certain there will be new eruptions, but we can't rule out that possibility either," President Mauricio Funes said in a televised address, urging residents to leave their homes fast and head to temporary shelters, CNN reported.
The ash clouds from the eruption have snarled air traffic while heavy ash fall has damaged crops and the local coffee plantation.
At 2,130 metres, the Chaparrastique volcano is the third highest volcano in El Salvador. Several coffee plantations are located in or around its flanks.
According to USGS, Chaparrastique is one of the most active volcanoes in the small Central American country. It has erupted at least 29 times since 1699.
"The population density around San Miguel volcano coupled with the proximity of major transportation routes increases the risk that even small volcano-related events, like landslides or eruptions, may have significant impact on people and infrastructure," USGS said.
The last major eruption of the Chaparrastique volcano was in 1976 while it caused strong tremors in the region in 2010.