It struck, at a depth of some 34 km, near Quellon on the island of Chiloe, southwest of the city of Puerto Montt.
No deaths are being reported but the quake did cause damage.
Thousands of people fled to higher ground after evacuations were ordered in the Los Lagos region, amid fears a tsunami could bring up to 3 metre high waves crashing into low-lying areas, as far as 1,000 kilometres away from the epicentre.
Chile has a long history of deadly quakes, including a 8.8 magnitude quake in 2010 off the south-central coast, which also triggered a tsunami that devastated a coastal town.
¡Mucha fuerza y ánimo a los compatriotas afectados por el sismo en Chiloé y otras zonas del sur! Protocolos de emergencia ya están operando.— Michelle Bachelet (@mbachelet) 25 dicembre 2016
President Michelle Bachelet tweeted her support for those subjected to this latest tremor.
“Much strength and encouragement to the compatriots affected by the tremor in Chiloe and other areas in the south. Emergency procedures are already in place,” she said.