The Centre for Volcanology and Geological Hazard Mitigation (PVMBG) had warned the residents of Tagulandang island that a tsunami could be triggered by volcanic material collapsing into the ocean.
The warning, issued on Tuesday morning, remained in placed as of the afternoon.
The agency raised the alert status of Ruang to the highest level following the early morning eruption, urging residents not to go near the volcano.
Indonesia's disaster mitigation agency (BNPB) said that all 843 residents living in Ruang island, where the volcano is located, have been moved to Manado, the capital of North Sulawesi province. Residents of Tagulandang island are being relocated to Siau island to the north.
The eruption follows a series of eruptions earlier this month that forced hundreds to evacuate, and the airport in the provincial capital of Manado to close. That eruption also caused damage to some homes. At the time, the volcanology also issued a warning about the potential for a tsunami.
Footage shared by Indonesia's disaster agency showed strikes of lightning flashing above Ruang's crater, as fiery red clouds of lava and rocks were projected into the air and rained down around the island.
The volcanology agency said the eruption column reached five kilometres high, and urged any remaining residents within a seven kilometre radius to immediately evacuate, warning of possible further "explosive eruptions".
Ruang island is about 100km from Manado, the capital of North Sulawesi province in the north-central region of the sprawling Indonesian archipelago.
The eruption corresponded with a spike in seismic activity and deep volcanic earthquakes, the disaster agency said.
Authorities closed Manado's Sam Ratulangi airport again on Tuesday, citing the possible spread of volcanic ash, the airport operator said in an Instagram post. The airport will remain closed until noon on Wednesday, the transport ministry said.
Authorities downgraded the status level to level three last week before bumping it up again to level four on Tuesday.
Indonesia straddles the so-called "Pacific Ring of Fire," an area of high seismic activity where multiple tectonic plates meet.
