Merapi, in Indonesia's densely populated central Java region, has been rumbling ominously in recent weeks whilst spewing clouds of black ash and lava.
Many people living closest to the crater have been evacuated.
"Because there has been constant lava flows that cause hot gases, we have raised the status to the highest level," said Bambang Dwiyanto, head of the region's vulcanology center.
The code red alert meant that the volcano could erupt within 24 hours, said Dali, an Indonesian vulcanologist, who goes by a single name.
Lava began to flow from the volcano on Thursday and had travelled about one mile from the crater by Saturday.
"I could see the lava clearly from my home this morning. Then they ordered us to evacuate our village," said Anton, a 25-year-old resident of Boyong village, around 8 km (5 miles) from Merapi.
Government officials along with army and police evacuated more than 5,000 people living near the volcano to tents and shelters following the alert.
"So far, we have not faced any significant problem during the evacuation process. We are first evacuating the elderly and children," said Hery Prawoto, an official at a Merapi evacuation post.
The local government had been struggling to a conduct mass evacuation because some villagers living on the slopes refuse to be moved.
Most Javanese villagers consider the mountain sacred and every year a priest climbs to the top to make an offering.
Many Indonesians also see activity in Mount Merapi as an omen of looming political unrest.
Merapi, which means "mountain of fire", is one of 129 active volcanoes in Indonesia and part of the Pacific "Ring of Fire" - a series of volcanoes stretching from the Americas through Japan and Southeast Asia.
Seventy people were killed when Merapi erupted in 1994 and around 1,300 when it erupted in 1930.