Indonesia has lifted a tsunami warning issued on Wednesday after a powerful earthquake struck off northern Sumatra.

The US Geological Survey said Tuesday's quake had a preliminary magnitude of 7.3 and struck 420km off the coast of Aceh province. It was centred 30km beneath the ocean floor.

Arief Akhir, an official with Indonesia's geological agency, said a tsunami warning has been issued.

Local people in Banda Aceh ran away in panic from buildings after news of the tsunami warning and the quake. No major damage in the provincial capital was seen, witnesses said.

Another witness at the beach in Aceh said the sea level had decreased following the quake.

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

A giant quake off the country on December 26, 2004, triggered a tsunami in the Indian Ocean that killed 230,000 people, half of them in Aceh.