YOGYAKARTA, Indonesia - A powerful earthquake flattened homes and hotels in central Indonesia early Saturday as people slept, killing at least 2,700 and injuring thousands more in the nation's worst disaster since the 2004 tsunami.

Victims are treated outside a hospital after a strong earthquake in Yogyakarta, Central Java, Indonesia, Saturday, 2006.[AP]

The magnitude-6.2 quake struck at 5:54 a.m. near the ancient city of Yogyakarta, 250 miles east of the capital, Jakarta, as most people were sleeping, causing death and damage in many nearby towns.

The quake's epicenter was close to the rumbling Mount Merapi volcano, and activity increased soon after the temblor. A large burst spewed hot clouds and sent debris cascading some two miles down its western flank.

Bambang Dwiyanto of the Energy and Mineral Ministry said the two events did not appear to be directly related but warned that Saturday's earthquake could trigger a larger eruption.

"It will influence the activities of Mount Merapi, particularly in the lava dome," said Dwiyanto, head of the ministry's geological division.