Vanuatu's East Epi underwater volcano erupted on Wednesday, hurtling ash into the sky and leading authorities to warn ships and aircraft to avoid the area.

"We are telling locals to watch out for any strong explosions as the eruptions are still ongoing," senior volcano officer Ricardo William, at the meteorology and geo-hazards department, said.

A 10-kilometre "danger zone" has been established around the submerged volcano, which lies 68 kilometres north of the capital Port Vila.

After reports of steam over the site, the underwater volcano started belching ash up to 100 metres high early on Wednesday.

Volcanic activity started shortly before 5:00am Hong Kong time.

Eyewitness Philip Dick, a government official, said the ground started shaking and smoke above the site was visible in the early hours.

"Then the explosions began – there is still a bad smell of sulphur within the nearby villages," he added.

The Pacific island nation was rocked by a 7.0-magnitude earthquake in early January off the largest island Espiritu Santo in the north of the archipelago.

Vanuatu is in the Pacific "Ring of Fire", where tectonic plates collide. It experiences frequent seismic and volcanic activity. (AFP)