The quake in Zhaotong prefecture, in the province's northeast on Sunday, toppled buildings and left rescue teams and residents to pull survivors from beneath the rubble, images on social media showed.
"At least 367 people have been killed and 1,881 people were injured," the official news agency Xinhua reported early Monday, citing rescuers.
The US Geological Survey (USGS) reported the quake at a magnitude of 6.1 and said it struck at a relatively shallow depth of 10 kilometres (six miles) at 4:30 pm (0830 GMT).
"Too many buildings were damaged and we are collecting data on deaths and injuries," Xinhua quoted local official Chen Guoyong as saying in the township of Longtoushan, which sits at the epicentre.
State television broadcast footage of people running from their homes and gathering in the streets, as witnesses described the devastation on social networks.
"The walls of several buildings crumbled, and water pipes were ruptured. The electricity was cut off," wrote a user in Ludian county, 23 kilometres from the epicentre, on China's Twitter-like Weibo.
The user's message was accompanied by images of cracked walls and a pile of bricks strewn across the road.
Another Ludian resident described the scene as resembling a "battlefield after bombardment," telling Xinhua: "I have never felt (such) strong tremors before. What I can see are all ruins."
Volunteer Ma Hao, a college student who was helping to carry the injured out of the collapsed buildings in Longtoushan, described a race to pull the living from the rubble that left little time for the dead.
"We had no time to take care of the bodies. We need to help those alive first," he told Xinhua.
Ludian was the worst hit with 296 residents killed there while 60 died in Qiaojia county, according to Xinhua who cited local officials.
Some 10 people were killed in the Huize area of Qujing city and there was another death in the Zhaoyang district of Zhaotong, the news agency added.
Electricity and telecommunications have been cut across the area and 57,200 residents need to be transferred to safe areas, Xinhua reported. More than 12,000 houses were toppled and 30,000 damaged in the quake zone, the agency said.
A second quake of magnitude 4.1 was registered just two and a half hours later, 18 kilometres south of Zhaotong city, the USGS said.
Ludian has a population of nearly 266,000 and sits more than 300 kilometres from the provincial capital of Kunming.
- 'Help those alive first' -
State media announced that 2,500 troops had been dispatched to quake-hit areas late Sunday, joining a team of more than 300 police and firefighters from Zhaotong city, the capital of the prefecture.
Equipment brought to the area included life detection instruments and excavating tools.
The province also sent 392 rescuers and sniffer dogs to aid the relief operation. Xinhua said more than 7,000 rescuers had been dispatched as President Xi Jinping called for "all-out efforts."
A spokesman for UN chief Ban Ki-moon said the secretary-general was "saddened by the loss of life."
"He offers his condolences to the Chinese government and the families of those killed, and his deepest sympathies to those who were injured or otherwise affected in this disaster," the spokesman added.
The White House National Security Council also offered condolences, and said the United States "stands ready to assist."
"Our thoughts and prayers are with the families of those that lost their lives, those injured or displaced, and all the people of China on this difficult day," spokeswoman Bernadette Meehan said.
Heavy rain was posing a challenge to rescuers.
The USGS had warned that people in the region lived in structures "highly vulnerable to earthquake shaking."
Complicating matters, the road leading to Longtoushan was damaged in a landslide before the quake.
Chinese state media put the magnitude of the first earthquake at 6.5, citing the China Earthquake Networks Center.
Southwest China lies where the Eurasian and Indian plates meet and is prone to earthquakes. In 1974, a 6.8-magnitude quake in the same area killed more than 1,500 people.
In September 2012, 80 people were killed when twin earthquakes struck the mountainous border area of Yunnan and Guizhou.
An 8.0-magnitude quake in May 2008 rocked Sichuan, which neighbours Yunnan, killing tens of thousands of people and flattening swathes of the province.