It said a third eruption was likely over the next few hours.
President Michelle Bachelet said she would travel to the affected area Thursday along with several ministers.
"The ash might damage crops, animal feed, bridges, roads, people's work routines, tourism and especially their health," Bachelet said.
On a 0-8 scale measuring volcano eruption strength, the first one came in at four or five, Interior Minister Rodrigo Penailillo said.
The second one was just about as powerful, the ministry said.
Until minutes before the blast, volcano eruption monitoring systems had picked up nothing. In fact, volcano watchers in Chile had been watching another one, Villarica also in the south, for a possible eruption.
'Very, very frightened' Emergency measures were also in place in Argentina, where the picturesque city of Bariloche -- about 100 kilometers from the volcano -- warned people to stay at home to avoid inhaling dust particles from the volanic ash.
Classes in Bariloche were cancelled for Thursday. At hospitals, staff shifts were rearranged to deal particularly with ash from Chile.
The Chilean geology service that much of the ash from the volcano was in fact headed for Argentina.
Puerto Montt, over the border from Bariloche and the largest Chilean city in the area, was already blanketed in a cloud of ash.
"People are very, very frightened," said Gervoy Paredes, mayor of Puerto Montt.
"The situation is pretty complicated," he added, saying reports indicated the Blanco river was flooding because of ice melt triggered by the eruption.
Airlines canceled flights as the towering ash cloud rose from Calbuco's snowy peak and schools also suspended classes in the region.
Television footage showed large traffic jams and long lines at gas stations in Puerto Montt, where a red alert was declared, along with nearby Puerto Varas.
"I would like to call on the population to remain calm and stay informed," Penailillo said.
Police called on residents to keep roads as clear as possible to aid the evacuation.
It was a "rather explosive eruption," said Gabriel Orozco, a volcanologist at the National Geology and Mining Service.
He said the 10-kilometer-high ash cloud risked collapsing, and warned: "River beds are very dangerous at the moment" because of the risk of ice and snow melting and causing floods.
The 2,000-meter (6,500-foot) volcano is located in the Los Lagos region, some 1,400 kilometers south of the capital Santiago.
It is the second volcano in southern Chile to have a substantial eruption since March 3, when the Villarrica volcano emitted a brief but fiery burst of ash and lava.
That eruption caused authorities to evacuate more than 3,500 people.
No lava was seen in the latest eruption, which began around 6:00 pm (2100 GMT).
But the ash cloud, which could be seen from 20 kilometers away, loomed over the crater, turning hues of pink and yellow as the sun set late Wednesday over the area.