"It's a river of lava that overflowed its banks and affected the El Rodeo village. There are injured, burned and dead people," said Sergio Cabanas, head of Guatemala's disaster agency Conred.
He said four people had died when lava set a house on fire and two children were killed while standing on a bridge watching the eruption.
The agency says two million people have been affected.
Nearly 300 are believed to have been injured.
Around 3,200 people have been evacuated from nearby communities according to authorities.
Volcan de Fuego - which means "Volcano of Fire" in English - is 25 miles (40km) southwest of the capital, Guatemala City.
It began exploding shortly before noon local time (7pm UK time) on Sunday.
Eddy Sanchez, director of the country's seismology and volcanology institute, said the lava flows reached temperatures of about 700C (1,300F).
Eddy Sanchez, director of the country's seismology and volcanology institute, said the lava flows reached temperatures of about 700C (1,300F).
"We have seven confirmed dead, four adults and three kids, who were already taken to the morgue," said Mario Cruz, spokesman for the volunteer firefighter corps.
"Unfortunately El Rodeo was buried and we haven't been able to reach the La Libertad village because of the lava and maybe there are people that died there too," said Mr Cabanas.
The eruption sent ash billowing over the surrounding areas.
A red alert has been set up in the areas most affected by the eruption, and an orange alert throughout the country.
President Jimmy Morales said he had convened his ministers and was considering declaring a state of emergency in the departments of Chimaltenango, Escuintla and Sacatepequez.
President Jimmy Morales said he had convened his ministers and was considering declaring a state of emergency in the departments of Chimaltenango, Escuintla and Sacatepequez.
Hundreds of rescue workers, including firefighters, police, soldiers and Red Cross personnel have been dispatched to support emergency operations.
A woman covered in ash said lava had poured through fields and she feared more people had died.
"Not everyone escaped, I think they were buried," Consuelo Hernandez told local news outlet Diario de Centroamerica.
Lava streamed down the streets of a village as emergency crews searched homes looking for trapped residents, another local news source reported.
Lava streamed down the streets of a village as emergency crews searched homes looking for trapped residents, another local news source reported.
The eruption forced the capital's international airport to shut down its only runway, as ash and smoke filled the sky and blanketed cars, roads and houses.
Mr de Leon said a change in wind was to blame for the volcanic ash falling on parts of the city.
A British backpacker, who was trekking close to the volcano just the day before, told the Press Association he felt "fortunate".
Richard Fitz-Hugh, 24, said: "We knew it was active, it's all part of the experience, you go up and see the lava, that's the point of climbing Acatenango.
"I don't know anyone who has been physically harmed (on Acatenango), but obviously it wouldn't be completely safe being up high today - I'm sort of fortunate that I did it before."
Volcan de Fuego, which is 3,763m (12,346ft) high, is also close to the popular tourist destination Antigua, known for its coffee plantations. It is the second time it has erupted this year.
Guatemala, which has a population of about 15 million people, has two other active volcanoes - Santiaguito in the west, and Pacaya, just 12.4 miles (20km) south of the capital.
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