Augustine Volcano exploded back to life for the first time in 20 years at around 4:44am (1444 GMT), spewing a large plume of ash and smoke into the sky from its summit, the US Geological Survey (USGS) said.
The peak lies on a desolate island in Cook Inlet, which lies about 288 kilometers (180 miles) southwest of Anchorage.
The USGS, which raised its alert level for the are to red from orange, said it expected the eruption to be similar to ones in 1976 and 1986 when volcanic ash belched by the volcano was spread well beyond Cook Inlet.
However the US Weather Service said that so far the plume of smoke and ash was not heading towards Anchorage and had only travelled about 80 kilometers (50 miles) to the north and 48 kilometers to the east.
Experts said the seismicity in the area had died down but was likely to increase again soon.
Since spring 2005, the Alaska Volcano Observatory (AVO) detected increasing unrest at Augustine Volcano which is laden with scientific instrumentation, according to the USGS.
"Our scientists were able to detect unrest and correctly forecast the likely behavior of the volcano before it erupted," said USGS Volcano Hazards Program Coordinator Doctor James Quick.