"Based on historical data and tsunami modelling, this natural disaster is not capable of generating a tsunami affecting the Indian Ocean region", said the Meteorological, Climatological and Geophysical Agency of Indonesia.
The U.S. Geological Survey put the magnitude of the second quake at a strong 7.5, after first saying it was 7.7.
The disaster agency briefly issued a tsunami warning before lifting it.
A swarm of strong aftershocks including one of magnitude 6.7 shook the region.
Disaster agency spokesman Sutopo Purwo Nugroho said the tsunami hit Palu, the capital of central Sulawesi province, as well as the smaller city of Donggala and several other coastal settlements on Friday.
The quake was larger in magnitude than the 2006 Yogyakarta natural disaster, which measured 6.4 in magnitude, and the recent 7.0-magnitude Lombok natural disaster in August.More news: Raj Kapoor's wife, Krishna passes away
He said in a statement there is "much damage" in the Donggala area, which is home to about 300,000 people.
"We advise people to remain in safe areas".
Communications with the area are hard because power and telecommunications are cut, hampering search and rescue efforts.
The national search and rescue agency will deploy a large ship and helicopters to aid the operation, said agency chief Muhammad Syaugi, adding he had not been able to contact his team in Palu.
A massive quake, measuring 7.5 on the Richter magnitude scale, hit the Indonesian island of Sulawesi on Friday.
Some people climbed 6m trees to escape the tsunami and survived, Nugroho said.More news: Alan Dershowitz Urges Delay Of Kavanaugh Confirmation Vote For FBI Probe
"The intensity of the quake in Donggala is higher than in Palu, so we suspect we'll see a high number of victims in Donggala, although Palu has a larger population than Donggala", Sutopo said.
Television footage showed people running into the streets. Earlier Friday, a 6.1 magnitude quake killed one person, injured several others and damaged dozens of homes, according to the AP.
In 2004, the Indian Ocean tsunami killed 226,000 people in 13 countries, including more than 120,000 in Indonesia.
This natural disaster came after a series of strong quakes in August killed hundreds on the island of Lombok, south of Sulawesi.
Indonesia is especially prone to earthquakes due to its location in the Ring of Fire - an area in the Pacific Rim known for its frequency of earthquakes and volcanic eruptions.More news: Some iPhone XS, iPhone XS Max users reporting charging issues