The government was considering evacuating tiny communities around the 12,540-foot Fire Volcano in the western state of Colima after the pre-dawn eruption on Monday.
"It's the largest explosion in the past 15 years and we are monitoring it, because the activity is increasing, though gradually," said federal civil protection coordinator Carmen Segura.
"If necessary, we will carry out evacuations."
A shower of volcano ash closed the airport at the city of Colima, 30km away, and lava crept down the side of the mountain.
"The lava is very dense and is moving slowly. It has caused the grass to burn," said Melchor Ursua, head of civil protection in the Pacific coast state.
Last week, the volcano, located in a sparsely populated rural area, about 500km from the Mexican capital, belched lava and glowing rocks, but prompted no evacuations.
Locals in the village of San Marcos, long used to eruptions, said they were more concerned about livestock grazing on the slopes of the volcano than their own lives.
"I am worried because I have animals over there. The poor little things are going to burn," said Monica Trujillo, who has 40 cows on the volcano slopes.
Villagers in the area were last evacuated in May 2002, after a series of small blasts. The volcano's last major eruption was in 1913; but it has blown up intermittently in the last decade.