The 6.9 magnitude quake struck offshore at a depth 42 kilometres (26 miles), some 150 kilometres (90 miles) from Labuan, southwest of the capital Jakarta, according to the United States Geological Survey (USGS).
The USGS initially put the quake's magnitude at 6.8 before raising its intensity.
Indonesia's disaster agency pegged the quake at magnitude 7.4 and warned it could spark a tsunami.
"There are some areas at risk of a serious threat of a tsunami that could be as high as three metres," said agency official Rahmat Triyono.
"We're still waiting for reports about damage" from the quake, he added.
Residents in Jakarta fled their homes as buildings in the megacity swayed from the force of the quake, which struck at 7:03 pm (1203 GMT).
"The chandelier in my apartment was shaking and I just ran from the 19th floor," 50-year-old Elisa told AFP.
"Everybody else ran too. It was a really strong jolt and I was very scared."
At least two people were killed and thousands were forced from their homes after a major 7.3-magnitude earthquake hit the remote Maluku islands in eastern Indonesia this month.
Indonesia experiences frequent seismic and volcanic activity due to its position on the Pacific "Ring of Fire", where tectonic plates collide.
Last year, a 7.5-magnitude quake and a subsequent tsunami in Palu on Sulawesi island killed more than 2,200 people, with another thousand declared missing.
On December 26, 2004, a devastating 9.1-magnitude earthquake struck off the coast of Sumatra and triggered a tsunami that killed 220,000 across the Indian Ocean region, including around 170,000 in Indonesia.
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