The quake, which struck at 12:40 p.m., shook the Chilean capital 780 miles to the south of the epicenter, and was felt as far away as the other side of the continent in Sao Paulo, Brazil, 1,400 miles to the east.
The U.S. Geological Survey calculated the magnitude at 7.7. It was followed by several aftershocks, including three larger than magnitude 5. The University of Chile's Seismological Institute put the epicenter near Quillagua, a tiny desert village in the foothills of the Andes mountains.
"It was incredible. I thought my last day had come when I saw the mountain shaking under a large cloud of dust," Maria Ines Palete, a Quillagua resident told the state television.
Two women were killed in the town of Tocopilla, 25 miles from the epicenter, when their houses collapsed, authorities said. Hospital director Juan Urrutia said at least 100 people were treated there for injuries or panic.
Hardest hit were the cities of Tocopilla and Maria Elena.
In Tocopilla, 100 houses were destroyed and another 2,500, or 40 percent of the city's total, were damaged, said presidential spokesman Ricardo Lagos Weber. Two sections of Tocopilla were evacuated and two schools were being used as shelters for those left homeless by the quake.
Chile's government said it was flying 500 emergency housing units to Tocopilla and that they should be installed by Thursday morning.
Lagos Weber said 1,200 homes were damaged in Maria Elena or 70 percent of the city's total and residents were still without running water, electricity and telephone service.
"I was at work and came home after the quake to find that I no longer have a house," said Julio Lopez, a Maria Elena resident.
At the badly damaged Lautaro restaurant in Maria Elena, a dozen men drank beer by candlelight.
"What else can I do? I lost everything. So I'll just have a few drinks," said Samuel Araya, a 57-year-old miner in this town of 7,000 people, which was once a nitrate mining center.
Residents gathered in the darkened main plaza to discuss the earthquake.
Blanca Pizarro said she took refuge under her kitchen table when the quake struck and seconds later the roof collapsed on the table.
"I'm alive by a miracle," she said.
Chile's largest copper mines are in the quake area and production was halted as electric power was cut for several hours. But Codelco, which operates some of the largest mines, said the situation was back to normal by the end of the day. Chile is the world's largest copper producer.
About 10 road workers were trapped near Tocopilla when a section of a tunnel they were repairing collapsed, but all were in good condition and rescuers were working to free them, according to the government's emergency bureau.
In the port city of Antofagasta, 105 miles south of the epicenter, police Capt. Javier Carmona said at least 45 people were injured.
But reports were incomplete as government ministers boarded flights to the area. President Michelle Bachelet was expected to fly to northern Chile on Thursday.
The U.S. Pacific Tsunami Warning Center issued, then canceled, a tsunami warning for Chile and Peru. It said the quake generated only a two-foot wave.
Scientists were trying to determine why such an intense quake apparently did not cause more damage.
"The ground in the region is very good, very firm, so the movement's effect on buildings is limited," said Sergio Barrientos, a seismologist at the University of Chile.
"It comes down to the level of shaking in certain places," said Paul Earle at the USGS. "It's not immensely populated in the areas most affected."
The quake occurred in one of the most seismically active regions in the world, where the Nazca tectonic plate is shoving itself beneath the South American plate.
A 1939 quake in Chile killed 28,000 people and in 1960, a magnitude-9.5 quake the strongest recorded in the 20th century killed 5,700 people. On June 13, 2005, a magnitude-7.8 quake near Tarapaca in northern Chile killed 11 people and left thousands homeless.