Authorities issued a tsunami warning but later lifted it when Indonesia's Meteorology, Climatology and Geophysics Agency said monitoring showed no significant sea-level changes that would pose a threat to coastal communities.
The US Geological Survey said the quake hit Indonesia's Flores region with a depth of 10km at 4.58am on Saturday (7.58am AEST).
Its epicentre was 70km north-northwest of the city of Ende in East Nusa Tenggara province. The initial quake was followed by several aftershocks.
Preliminary reports from the Maumere Search and Rescue Agency said that at least two residents were killed and two others injured as the earthquake caused severe damage and collapsed buildings, according to Indonesia's disaster management agency.
Footage on local television showed patients at several hospitals being evacuated from buildings as a precaution following the quake. Hospital staff moved equipment outdoors, including beds, IV stands and oxygen cylinders, and set up temporary treatment areas to adapt to emergency conditions.
The quake was felt across much of Flores island with initial reports indicating heavy damage.
Yohanna Embu, a resident of Sikka, a regency within East Nusa Tenggara province, said a number of buildings were damaged by the strong shaking and panicked people ran to higher ground.
"Many buildings here were damaged ... I saw that the waiting room at the port terminal in Maumere had collapsed," she said.
Students at St Peter Major Seminary in Sikka who were attending morning Mass fled in panic when the roof of an assembly hall collapsed, said the Reverend Guidelbertus Tanga, rector of the seminary, which is known locally as Ritapiret Seminary on the predominantly Catholic island of Flores.
"Our students and nuns ran out in panic beneath a collapsing roof," Tanga said.
"At least one priest suffered a broken leg after jumping from the second floor of a building during the quake."
Indonesian authorities initially issued a tsunami warning for parts of East Nusa Tenggara, West Nusa Tenggara, South Sulawesi and Southeast Sulawesi provinces, and urged residents to stay away from beaches and riverbanks, and residents on the coastline to move to higher ground.
The agency located the shallow undersea quake near Flores island.
Indonesia, a vast archipelago of more than 17,000 islands, is prone to earthquakes and volcanic activity because of its location on the "Ring of Fire," an arc of volcanoes and fault lines in the Pacific Basin.
In December 1992, a powerful earthquake caused a tsunami that killed about 2500 people on the southeastern island of Flores, part of a group of islands in the eastern half of Indonesia.
