A volcano in southern Chile has erupted, prompting officials to evacuate thousands of people in the surrounding area.

The Villarica volcano erupted at around 3am local time (0600 GMT), according to the National Emergency Office, which issued a red alert and ordered evacuations.

Several local news sites showed images of the volcano bursting at the top, with lava spewing out mixed with heavy smoke.

The 2,847-metre volcano is located in Chile's central valley, about 670 kilometres south of Santiago.

It is one of South America's most active volcanoes and sits above the small city of Pucon, where tourists flock for outdoor activities, including hiking around the volcano.

Chilean authorities issued an alert on Monday because of increased volcanic activity, and began preparing for evacuations.

President Michelle Bachelet announced that she will travel to the volcano-hit area and asked residents to remain calm.

About 3,500 people have been evacuated so far, including tourists, said interior and security minister Rodrigo Penailillo.

Chile has more than 2,000 volcanoes in the Andes cordillera and about 90 of them remain active.