The quake struck off the northwest coast of Sumatra in an area devastated by the massive Asian tsunami of 2004, triggering local warnings and an alert in nearby Thailand.
Residents of Banda Aceh, the provincial capital, said they felt the earth shudder with frightening intensity for about a minute.
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Many fled their homes or piled onto motorcycles to head inland in fear of destructive waves, but a tsunami warning issued by the Indonesian government was lifted about two hours later.
"People panicked and ran out of the house, it lasted almost a minute," an AFP reporter in Banda Aceh said.
"I saw a lot of people who live close to the sea using motorcycles to drive inland."
The quake struck at a depth of 46 kilometres at 5:15 am (AEST GMT Tuesday), according to the US Geological Survey.
Indonesian geologists said the epicentre was 60 kilometres southeast of Sinabang, on Simeulue Island of Aceh province.
The people of Aceh are still traumatised by memories of the 2004 disaster, when the Indian Ocean surged over the northern tip of Sumatra after a 9.3-magnitude quake split the seabed to the island's west.
Indonesia was the nation hardest hit, with at least 168,000 people killed out of more than 220,000 who lost their lives across the region.
Officials in Sinabang and the Indonesian capital of Jakarta said there were no immediate reports of damage near the epicentre. Electricity was down in the Acehnese capital of Banda Aceh but mobile phones were working.
"Our personnel haven't found any damage in Sinabang," local police chief Dedi Junaidi told MetroTV.
The Pacific Tsunami Warning Center said sea level readings indicated a tsunami was generated in waters off Sumatra but it was not destructive.
The threat was assumed to have passed two hours after the quake although shipping and coastal structures still faced the danger of strong currents, it added.
The National Disaster Warning Centre in Thailand issued a tsunami warning for the Andaman Coast, where an estimated 5,400 people were killed in 2004.
It later cancelled the alert, saying only small waves were generated by quake.
Indonesia sits on the Pacific "Ring of Fire," where the meeting of continental plates causes high volcanic and seismic activity.
The Indo-Australian and Eurasian tectonic plates converge off the western coast of Sumatra and scientists believe it is only a matter of time before a major catastrophe strikes the area again.
A 7.6-magnitude quake killed about 1,000 people in the port of Padang, western Sumatra, in September last year.
