Flights in the region were canceled and more than 3,500 people stayed away from their homes near the volcano, which produced an eerie show of lightning dancing through its clouds of ash overnight.
Most of the residents in 22 settlements near the Puyehue-Cordon Caulle volcanic complex evacuated when the eruption began Saturday afternoon and were staying in government shelters or friends' homes. One group of 122 people were being moved from a shelter for fear that the eruption could cause flooding on the Nilahue River.
There were no reports of injuries.
Rodrigo Ubilla, Chile's undersecretary of labor, said some people near the volcano had decided not to leave their homes because they didn't want to abandon their animals.
Wind carried ash across the Andes into Argentina until Sunday afternoon, dropping a blanket of ash on the tourist town of San Carlos de Bariloche, which had to close its airport. Officials there urged people to use cover their mouths and noses against the ash, to stock up on food and water and stay indoors if possible.
A shift in wind direction Sunday began dropping more ash on Chile's side of the border.
"The situation is very complicated," said Santiago Rozas, mayor of Lago Ranco, a town about 40 miles (70 kilometers) north of the eruption.
"The shift means that we will have a rain of ash, with damage for the population and a threat to smallholder farming," Rozas said.
Officials closed the border crossing at Cardenal Samore because falling ash lowered visibility on the mountain road.
The eruption is nearly 620 miles (1,000 kilometers) south of Chile's capital, Santiago.
Authorities put the area on alert Saturday morning after a flurry of earthquakes, and the eruption began in the afternoon. The National Emergency Office recorded an average of 240 tremors an hour for the first 12 hours, but that dropped to about 17 an hour by Sunday, Interior Minister Rodrigo Hinzpeter said.
With the Andes running along its entire length, Chile has more than 3,000 volcanoes, of which about 500 are considered active and 60 have had eruptions recorded over the past 450 years.