Chile has raised the alert level for the Copahue volcano to red, the highest possible, as seismic activity in the area increased overnight.

The volcano, which lies just over the border in the southern Andes of Argentina, began spewing out ash and gas on Saturday.

Ash has been falling on both sides of the border and local residents have been told await further instructions.

Chile's National Emergency Office issued a red alert but did not order evacuations as no towns are in the current risk area.

"The intensity of seismic signals suggests the eruption in progress is on the smaller side (but) we are not ruling out the possibility that the activity could turn into a larger-scale eruption," the Geology and Mining Service said in a statement.

While the 2,965-metre volcano straddles the two countries' border, its crater, where most of the activity was under way, leans toward the Argentine side, experts said.

Population in the area is sparse: about 500 people live in Copahue, a tourist town famous for its spa waters, about 900 in the town of Caviahue and an estimated 800 more in local indigenous Mapuche communities.

The June 2011 eruption of Chile's Puyehue volcano interfered with air travel in much of the southern cone of South America and as far away as Australia.

ABC/AFP