Mount Rokatenda, on the tiny island of Palue, sent fast-moving red-hot ash onto a nearby beach, leaving three adults and two children dead, said vulcanology centre head Surono.
Rokatenda has been on high alert since October, with authorities banning people from any activities within three kilometres (1.9 miles) from the crater on the island of around 7,000 inhabitants.
Surono, speaking from Bandung city on Java island, said his staff at the scene had reported the five people had been killed within the exclusion zone.
It was not clear what the victims had been doing in the restricted area when it erupted, he said.
"We have found the bodies of the adults, but we are still looking for the children, and it is difficult because the area is still very hot," Surono, who like many Indonesians goes by one name, told AFP.
The volcano began erupting at 04:27 am (2027 GMT Friday) and it continued for nearly four hours, said Surono.
He said volcanic ash travelled as far as 2,000 metres (6,560 feet) from the crater.
The Indonesian archipelago has dozens of active volcanoes and straddles major tectonic fault lines known as the "Ring of Fire" between the Pacific and Indian oceans.
The country's most active volcano, Mount Merapi in central Java, killed more than 350 people in a series of violent eruptions in 2010.