An earthquake with a magnitude of 8.8 - near the top of the Richter scale - struck near the city of Concepcion, Chile, in the small hours of Saturday morning.
The earthquake shook buildings and caused power blackouts in the capital, Santiago, more than 300km to the north, where a chemical plant caught on fire.
The quake, registered by the US Geological Survey as centred 115km north-east of Concepcion at a depth of 35km, occurred at 3.34am local time (7.34pm Saturday NZ time).
Concepcion is Chile's second largest city, with a population of about 1 million.
Many news websites and radio stations in Chile are not accessible. Electricity, water and phone services have been cut.
The BBC reports the earthquake is the biggest to hit Chile in 50 years.
The US Geological Survey has recorded eight aftershocks: the largest was magnitude 6.9 at 0801 GMT.
The ABC reports they were felt along a distance of 800km from Valdivia in the south to Valparaiso in the north.
President Michelle Bachelet has declared a state of catastrophe in affected areas and appealed for calm.
The death toll is reported to be at least 300 people. Housing Minister Patricia Poblete says about 1.5 million homes have been damaged.
Officials said the worst affected town appeared to be Parral, close to the epicentre.
Buildings as far away as the Andean provinces of Mendoza and San Juan were shaken.
A 1.6 metre metre tsunami was triggered in the port of Valparaiso.
The BBC reports Santiago was shaken for 1½ minutes.
Airline officials say Santiago airport is closed and all flights cancelled until further notice. Flights are being diverted to Mendoza in Argentina.
President Bachelet said a "wave of large proportion" had affected the Juan Fernandez island group, reaching halfway into one inhabited area. Two aid ships are reported to be on their way.
She added that "high tidal waves" could also reach Easter Island soon.
In 1960, Chile was hit by the biggest earthquake of the 20th century, a 9.5 quake that devastated the south-central city of Valdivia, killing 1655 people.
Tsunami warnings were issued for Hawaii, Australia, New Zealand, Central America and Pacific island nations.
The Pacific Tsunami Warning Center in Hawaii says:
"An earthquake of this size has the potential to generate a destructive tsunami that can strike coastlines near the epicentre within minutes and more distant coastlines within hours."
Previous powerful earthquakes
Haiti, 12 January 2010: About 230,000 people die after shallow 7.0 magnitude quake
Sumatra, Indonesia, 26 December 2004: 9.2 magnitude. Triggers Asian tsunami that kills an estimated 250,000 people
Alaska, United States, 28 March 1964: 9.2 magnitude; 128 people killed. Anchorage badly damaged
Chile, south of Concepcion, 22 May 1960: 9.5 magnitude. About 1,655 deaths. The tsunami hit Hawaii and Japan
Kamchatka, NE Russia, 4 November 1952: 9.0 magnitude.