Officials have advised residents living within a 10-kilometre (6.2-mile) radius of Mount Kelut to leave, with the Indonesian volcanology and geology disaster management centre saying the highest alert level status meant "an eruption is possible within 24 hours."
The agency said on its website it raised the alert level "based on the seismic activity, deformation, visual observation and temperature of crater lake... at 17.15 WIB, 16 October 2007."
Volcano monitoring post head Kristanto told a national television news "three surrounding districts of Kediri, Blitar and Malang have been instructed to clear the area of 10-kilometre radius from the crater immediately."
Officials said that evacuation drills had been conducted in at least nine villages near Mount Kelut in the past week.
An official at the volcanology office had warned that signs of an imminent blow-out were much stronger this time than preceding an eruption in 1990.
That was the last time the 1,731-metre (5,712-foot) volcano went off.
An estimated 15,000 people have been killed by the volcano in the last 500 years, including around 10,000 in a 1568 eruption.
Although Mount Kelut's slopes are sparsely inhabited, its peak is a popular domestic tourist destination and overlooks a densely populated plain.