The eruption of Java's Mount Kelud could be heard up to 125 miles away, Indonesia's disaster agency said.
Ratno Pramono, a 35-year-old farmer, said after returning from an evacuation centre to check on his property in a village three miles from the crater: "I thought doomsday was upon us.
"The eruption sounded like thousands of bombs exploding. Women and children were screaming and crying."
Ash and grit fell to earth in towns and cities across the region, including Surabaya, Indonesia's second-largest city after Jakarta, with a population of about three million.
It also fell even farther afield in Yogyakarta, where motorists switched on headlights in daylight, and lay two inches deep in some places.
A 60-year-old man and a 65-year-old woman were killed in the village of Pandansari near the mountain when the roofs of their homes collapsed under the weight of the ash and volcanic debris unleashed during the eruption.
The large international airport in Surabaya and airports in the cities of Yogyakarta, Solo, Bandung, Semarang and Cilacap were closed due to reduced visibility and the dangers posed to aircraft engines by ash.
Virgin Australia said it had cancelled flights yesterday from Australia to several locations due to the eruption, including the resort islands of Bali in Indonesia and Phuket in Thailand.
The disaster agency said tremors were still wracking the volcano but scientists didn't expect another major eruption.
It said all villages within six miles of Kelud - more than 100,000 people - had been evacuated to temporary shelters but some villagers were returning to their homes to begin cleaning up.
The 5680ft-high Mount Kelud in eastern Java has been rumbling for several weeks and was under close observation. The mountain is about 370 miles east of Jakarta, the capital.
Muhammad Hendrasto, head of Indonesia's volcano monitoring agency, said the mountain erupted violently about 90 minutes after authorities raised its alert status to the highest level.
The disaster agency said it had spewed millions of cubic meters of debris into the atmosphere.
Kediri, a normally bustling town about 19 miles from the mountain, was largely deserted as residents stayed indoors to avoid the choking ash.
Kediri resident Insaf Wibowo said: "The smell of sulphur and ash hung so thickly in the air that breathing was painful."
Some residents were shovelling the ash and grit into sacks to use for the construction of buildings or to fertilise crops.
Kelud is among about 130 active volcanoes in Indonesia. The nation is prone to volcanic eruptions and earthquakes because of its location on the so-called Ring of Fire - a series of fault lines stretching from the Western Hemisphere through Japan and south-east Asia.
Due to the fertile volcanic soil and the shortage of space on Java, hundreds of thousands of people live close to active volcanoes.
Kelud's last major eruption was in 1990 when it kicked out searing fumes and lava that killed more than 30 people and injured hundreds.
Earlier this month, Mount Sinabung in North Sumatra province erupted as authorities were allowing thousands of villagers who had been evacuated to return to its slopes, killing 16 people. Sinabung has been erupting for four months, forcing the evacuation of more than 30,000 people.