There were scattered reports of injuries, but only minor damage in most areas.
The quake struck at 5:15 a.m. (2215 GMT) and was centered undersea 125 miles (205 kilometers) northwest of the coastal town of Sibolga in Sumatra at a depth of 19 miles (31 kilometers), the U.S. Geological Survey said. It had earlier said the quake measured 7.8.
Indonesia's Meteorology and Geophysics Agency and the Pacific Tsunami Warning Center in Honolulu issued tsunami warnings following the quake, but lifted them two hours later.
The meteorology agency said a minor tsunami that at its largest was about 16 inches (40 centimeters) high hit Banyak island, Nias island and Sibolga.
Safnil, the head of a fishing village on Banyak, said the wave inundated homes along the beach and damaged several boats but caused no casualties. No tsunami damage was reported elsewhere.
A hospital on Simeulue island off the coast of Sumatra admitted 17 people for treatment of injuries sustained in the quake, including four in critical condition, said Capt. Ajas Siagian, a deputy police chief for the area.
Abdul Karim, a government spokesman in Simeulue, said dozens of houses collapsed or were damaged in Teupah Selatan village. He said no larger buildings were reported damaged, but electricity had been knocked out on the island.
"We are still collecting reports of damages and injuries ... but the situation has returned to normal and people are going back home," he said.
Local network Metro TV reported that a dormitory for nurses partially collapsed in Aceh province's Singkil district and one woman suffered minor injuries in the rush to get out of the building. It said fires sparked by the quake had burned at least 14 houses in Medan, the capital city of North Sumatra province. Electricity was cut in Medan, Banda Aceh, the provincial capital of Aceh, and other areas.
Paulus Prihandojo, another seismologist with the meteorology agency, said along with the quake's relative depth, the epicenter was too far away from the major population centers of Medan and Banda Aceh to cause major damage.
He said areas closer to the epicenter were more sparsely populated and many of the buildings in that area were made of wood, which fares better in earthquakes than brick and cement.
President Susilo Bambang Yudhoyono said the country had dodged what could have been a disaster.
"Thank God it did not lead to a major tsunami and there is no significant damage," he said.
At least five strong aftershocks measuring up to 5.2 were recorded, the meteorology agency said.
People in several cities along the southeastern coast of Sumatra as well as Sinabang on Simeulue island and Gunung Sitoli on nearby Nias island poured into the streets and rushed to higher ground after the quake.
"Rumors about a tsunami panicked villagers living near the beach," said Eddy Effendi, a resident on Nias island. "They ran away on motorbikes and cars or by climbing the hills. There was panic and chaos everywhere, but I don't see serious damage or injuries in my village."
Residents in Sibolga said the shaking lasted more than a minute and utility poles in the area were knocked down.
A 2004 tsunami triggered by a magnitude-9.2 earthquake in the same part of Indonesia killed 230,000 people in a dozen countries on the Indian Ocean basin.
