Volcanologists said powerful eruptions were catapulting burning rocks as high as 1,000m (3,280ft) above the crater and lava was flowing down its slopes.
Local residents reported how the roaring of the volcano shook windows and roofs in nearby villages.
Experts say the eruption of the Fuego, 50km (31 miles) south-west of Guatemala City, is the biggest since 1999.
Guatemalan President Otto Perez Molina said the eruption could affect people as far away as the capital.
"We will do the best we can to avoid people being harmed," he said.
Cars, lorries and buses covered in grey ash could be seen speeding away from the area towards Guatemala City.
'Pressure cooker'
 
Some of those who fled their homes headed for an emergency shelter at a school in the town of Santa Lucia Cotzumalguapa.
Miriam Carumaco, 28, who arrived there with 16 members of her family, said: "We heard loud thunder and then it got dark and ash began falling.
"It sounded like a pressure cooker that wouldn't stop."
Head of Emergency Evacuations Sergio Cabanas originally said evacuation orders for more than 33,000 people in 17 towns and villages had been issued.
However, he later said that 11,000 had been evacuated and no more would be necessary as the eruptions had died down by late Thursday.
"It is hoped that by tomorrow [Friday] the volcano will return to normal activity and that families will be able to return home," he said.
Officials said lava was covering a 7km (4.3-mile) area on the south and south-western side of the Fuego.
The authorities recommended that air traffic controllers suspend flights in the vicinity of the volcano, as the ash cloud emanating from its crater was spreading quickly.
The 3,760m-tall (12,336ft) Fuego is one of Central America's most active volcanoes.

course: BBC news Latin America & Caribbean