A photograph posted on the local RTC TV station website showed a huge plume of smoke rising into the sky, visible from the capital Praia on a neighbouring island.
“Things could deteriorate in the coming moments, in the coming hours,” prime minister Jose Maria Neves said in a statement.
“We’ve called on people to heed the authorities’ instructions, people should abandon Cha das Caldeiras.”
It was not immediately clear if there were injuries or deaths following the eruption.
The volcano last erupted in 1995, causing minor damage.
A larger eruption occurred in 1951.
The government is planning to send a plane providing assistance to residents.
The former Portuguese colony is located about 600 kilometres off the coast of Senegal.
Fogo’s volcanic peak, surrounded by vineyards, is also a popular hiking destination.