The volcano had been rumbling and spurting clouds of smoke for a week, and scientists had been warning of a dangerous build-up of pressure inside its crater.
The Popocatepetl volcano outside Mexico City has spewed molten rock thousands of metres into the air, forcing the authorities to evacuate some 40,000 people from surrounding villages.
Violent explosions could be seen above the crater, setting clouds of smoke alight in a bright orange glow.
The volcano had been rumbling and spurting clouds of smoke for a week, and scientists had been warning of a dangerous build-up of pressure inside its crater.
Seismologists are stopping short of calling it an eruption - they say no lava flow is imminent, although the shower of rocks and debris presents a real danger to the dozens of villages.
Some rocks were found 10 kilometres away.
Presidential address
Almost all the people living within a six-kilometre (four-mile) radius of the crater have been evacuated, while the authorities are working to move people still inside a 12km danger zone.
In an address to the nation, President Vicente Fox appealed for calm and co-operation among the people still close to the volcano.
Seismologists are due to fly over the crater early on Tuesday morning to determine just what the future might hold.
This is the first major burst of activity in the mountain for six years.
Popocatepetl had been sleeping for almost 70 years before that and its last major eruption happened centuries ago.
Until now many villagers had been reluctant to leave, believing that the experts were over-reacting.
"We didn't believe them until last night," said one man in a refugee centre. "Now we're scared."