The 6.4-magnitude quake struck at 5:34 a.m. and was centered in an old part of the historic city of Pu'er, in Ning'er County, the official Xinhua News Agency reported. The U.S. Geological Survey said the quake had a preliminary magnitude of 6.2.
At least three people died and more than 290 were injured, 15 seriously, Xinhua reported. One of the dead was a 5-year-old boy who was crushed by debris, state television reported. The boy's parents were also trapped but were rescued by local residents, it said.
"I didn't notice the initial quake and was woken up by my parents, and we ran out of our home," said a woman in her 20s who lives in Ning'er county and refused to give her name when reached by phone.
She said the initial quake lasted about one minute and that many residents fled their homes to find safety in open areas.
The local seismological bureau recorded 233 aftershocks by 2 p.m., the strongest with a magnitude of 5.1, said an official with the bureau who gave only his surname, Ma.
The earthquake caused several houses to collapse and damaged the communications network in the area, making it difficult for residents to make phone calls, Xinhua reported. Roads, water and power supplies were also affected.
The quake could be felt as far as 300 kilometers (185 miles) away, Xinhua said.
The evacuation of 120,000 residents was ordered after many buildings were deemed to be unsafe, Ma said. He said the seismological bureau was among many offices and homes in the area where walls had cracked.
Rescue teams with thousands of tents, quilts and other relief supplies were rushing to the area, Xinhua reported.
Pu'er City is in southwest Yunnan province which shares borders with Vietnam, Laos and Myanmar. It has been famous for centuries as a tea-growing area and was an important stop on a trade route that ran up and down western China between central Asia and southeastern Asia.
The area is prone to strong earthquakes, with 20 temblors above magnitude 5.0 hitting the area since 1990, Xinhua said.
Ning'er County has a population of 190,000, many belonging to the Hani and Yi ethnic minority groups.