The government ordered residents living within a five-kilometre (three-mile) radius of the crater on Java island to leave as ash covered surrounding communities and even reached parts of Yogyakarta, Indonesia's cultural capital some 30 kilometres away.
Officials have shuttered the city's international airport with two dozen flights cancelled following the eruption, which began around 7:30 am (1230 GMT).
It was not clear how many residents living around Merapi had left for local shelters, but around 12,000 people live in its immediate vicinity.
"Everybody ran here immediately," resident FamiliaEkawati said from a shelter, adding that there was little warning of the blast before it happened.
"There was no sign it would be erupting."
Some 120 people who were hiking on the mountain when the eruption happened are safe, the government said.
Merapi previously erupted in 2010, killing more than 300 people and forcing 280,000 to flee, in what is considered its most powerful eruption since 1930.
Despite Friday's evacuations, officials played down the danger, saying it was a phreatic eruption, which happens when magma heats up ground water, building up pressure inside the crater.
"This kind of eruption is not dangerous and could happen anytime to an active volcano," national disaster agency spokesman Sutopo Purwo Nugroho said in a statement.
"There have not been any more eruptions (since this morning)."
The volcano's alert status has not been raised.
The Southeast Asian archipelago nation of more than 17,000 islands and islets -- and nearly 130 active volcanoes -- is situated on the Pacific "Ring of Fire", a vast zone of geological instability where the collision of tectonic plates causes frequent quakes and major volcanic activity.
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