The 5.1 magnitude earthquake, which struck a mountainous area close to the border with Sichuan province, injured more than 100 people, state television said, with national radio reporting 51 people as seriously injured.
A Dousha government official, Chen Hua, said that at least five aftershocks followed the earthquake, the largest with a magnitude of 2.1.
At least 630 houses had been destroyed and some 500 houses risked collapsing, with direct economic losses from the tremor estimated at more than 300 million yuan ($38 million), according to the reports.
Many people had already left the area at the time of the quake to attend a weekly local trade fair, state radio said.
The epicentre of the quake was about 90km from Yunnan’s Zhaotong city.
The official Xinhua news agency said several hundred workers had joined the rescue effort.
The local government had restored roads and telecommunications damaged by the quake, but failed to resume electricity supply and train services on the Neijiang-Kunming railway.
Villagers were huddled under umbrellas and makeshift tents to keep away from the sun.
Xinhua said some 500 tents, 1,000 quilts and 500 blankets had been sent to the area.