More than 1,000 residents of the beach resort of Pangandaran ran, bicycled or drove inland amid shouts that water was coming.
Marino, a 42-year-old local man, said: "People suddenly started running so I joined them."
It was unclear how the rumour started.
Indonesia has no nationwide tsunami warning system and coastal residents had no notice of the onrushing wave on Monday.
The region has been rattled by aftershocks.
A strong quake off Java's coast on Wednesday, just hours after the panic in Pangandaran, caused buildings in the capital, Jakarta, to sway for more than a minute.
There were no immediate reports of damage or casualties.
The death toll from the tsunami that struck Indonesia's Java island has risen to 531 as the search for survivors continues.
Rescue workers are looking for 275 people still missing since huge waves struck a 300km stretch of coast two days ago.
Police and army teams used sniffer dogs and mechanical equipment on Wednesday in their search, but found only bodies amid the ruins.
Five bodies were found on beaches in the Pangandaran area alone early on Wednesday, Red Cross official Mehmet Selamat said.
Asked whether more were likely to be recovered, he said: "I think so. There are many fishermen missing."
More than a dozen corpses in yellow body bags lay in a makeshift morgue near the area's beach, a popular tourist spot known for its black-sand shore and barbeque seafood.
Officials said four foreigners were known killed in the quake.
"I saw a house coming towards me, but I couldn't run. It stopped 20 metres from me," Anne-Marie Kingmans, a Dutch tourist who survived, told Reuters.
"We heard no warning. People just came running," she said, adding that the waves washed a boat into the lobby of her hotel.
Government officials said as many as 54,000 people were displaced from wrecked fishing villages, farms and beach resorts.
Aid trucks have arrived for the thousands who lost their homes or who, fearing further tsunamis, had fled to hills above the coast.
Many have found refuge under plastic-sheeting shelters they made themselves while thousands of others remain inside mosques at Pangandaran and nearby Cilacap port, among the hardest-hit spots.
Indonesian media questioned why there was no warning ahead of Monday's killer waves despite regional efforts to set up early alert systems after the massive Indian Ocean tsunami of 2004.
The Jakarta Post said that the country's National Disaster Management Co-ordination Board had done "nothing of note to increase people's preparedness for disasters".
"Preparedness also covers efforts to build effective early warning systems based on sophisticated information and communication technologies," the daily said.
Jusuf Kalla, the Indonesia vice president, said the government would build an early warning system in Java and other areas in Indonesia in three years.