A strong earthquake off Indonesia's Sulawesi island killed at least two people and triggered a tsunami warning, which was later lifted.

The 7.5-magnitude underwater quake was centred 87 kilometres from Gorantalo, a coastal town on Sulawesi, the U.S. Geological Survey said Monday.

The tremor struck an area off northern Sulawesi. Thousands of people in nearby coastal towns fled homes, hotels and hospitals in panic. At least two people died, 37 were injured and more than 200 homes were damaged, some of them completely crumpled, according to Rustam Pakaya, the head of the Health Ministry's Crisis Centre.

The U.S. National Weather Service's Pacific Tsunami Warning Center said the temblor had the potential to generate a destructive tsunami along regional coasts within 1,000 kilometres.

Indonesia is prone to seismic upheaval due to its location on the so-called Pacific "Ring of Fire," an arc of volcanoes and fault lines encircling the Pacific Basin.

In December 2004, a massive earthquake off Indonesia's Sumatra island triggered a tsunami that battered much of the Indian Ocean coastline and killed more than 230,000 people, 131,000 of them in Indonesia's Aceh province alone.

Last year, a tsunami off Java island killed nearly 5,000 people.

With files from the Associated Press