KEY POINTS:

• A tsunami has struck the Indonesian island of Sulawesi following a major 7.5-magnitude earthquake.
• Buildings have collapsed and homes have been washed away.
• 'Several' people dead, say authorities
• A tsunami warning was in place – but then lifted before the wave struck

• Officials say waters have receded, but families are still missing.

UPDATED: 10:40 AM :
Five people are feared dead after a tsunami crashed through an Indonesian coastal city demolishing houses and leaving families missing.

A 6.1 magnitude quake hit Indonesia's densely populated Sulawesi region on Friday morning, quickly followed by even fiercer 7.5 magnitude tremors which caused the tidal wave.

The National Disaster Mitigation Agency has warned that initial reports show "victims died in the rubble of a collapsed building".

Dramatic video footage filmed from the top floor of a parking ramp spiral in Palu and posted on Twitter, showed a churning wall of whitewater flatten a large mosque.

Houses have been swept away and people reported missing as the waves struck Palu and another city, Donggala - Indonesian disaster agency spokesman Sutopo Purwo Nugroho confirmed.

Sutopo said communications with the area in central Sulawesi are down and the search and rescue effort is being hampered by darkness.

Palu resident Leonita Agustins happened to be in Jakarta when the quake and subsequent powerful tsunami rolled through his hometown.

"The earthquake damaged the house I live. The wall collapsed, the ceiling and some stuff fell down.

"Currently, I am unable to connect with people in Palu.

"I hope there will be enough medical staff to help them."

There were no immediate reports of deaths or injuries after the latest tremor, but it was a higher magnitude than a series of quakes that killed hundreds on the island of Lombok this summer.

A tsunami makes landfall at Palu, wiping out buildings. Photo / Twitter

Patients are evacuated from a hospital following a strong earthquake in Poso, central Sulawesi, Indonesia. Photo / AP

The Indonesian government caused widespread confusion after issuing a tsunami alert on Friday afternoon, then quickly repealing at 5pm despite the tremors.

Three hours later at 8pm local time a spokesman for Indonesia's geophysics agency confirmed that a tsunami had in fact occurred.

People in Central Sulawesi and West Sulawesi provinces were only then told to evacuate to higher ground.

It remains unclear as to whether people remained in their homes because of the contradicting government advice.

"There are reports that many buildings collapsed in the earthquake," Nugroho said in a statement.

"Residents panicked and scattered out of their homes."

Sulawesi is the fourth largest Indonesian island and is home to around 18million people - all of whom have been put on alert following the quake on Friday.

The New Zealand Embassy in Jakarta is in contact with local authorities. An MFAT spokesperson says they have no information at this stage to suggest that any New Zealanders have been affected.

There are currently 488 New Zealanders registered on SafeTravel as being in Indonesia.

All New Zealanders in Indonesia are advised to register their details on www.safetravel.govt.nz follow any instructions issued by local authorities and let their family know they are okay.

The US Geological Survey put the magnitude of the second quake at a strong 7.5, after first saying it was 7.7.

An earlier 6.1 magnitude quake destroyed some houses, killing one person and injuring at least 10, authorities said.

"The quake was felt very strongly, we expects more damage and more victims," Nugroho said.

In this photo released by the Disaster Management Agency, a house sits damaged after a magnitude 6.1 earthquake yesterday in Donggala, central Sulawesi, Indonesia. Photo / AP

A series of earthquakes in July and August killed nearly 500 people on the holiday island of Lombok, hundreds of kilometres southwest of Sulawesi.

Indonesia sits on the Pacific "Ring of Fire" and is regularly hit by earthquakes.

In 2004, a big earthquake off the northern Indonesian island of Sumatra triggered a tsunami across the Indian Ocean, killing 226,000 people in 13 countries, including more than 120,000 in Indonesia.