Preliminary reports said the earthquake, which occurred at 2:30 p.m. local time Sunday (11:30 p.m. Saturday ET) measured 8.0 but USGS later downgraded its magnitude.
The USGS estimates that 72,000 people would have experienced severe shaking as a result of the quake.
The predominant structure of homes in the area meant they were vulnerable to earthquakes, it said, and fatalities were possible.
The Pacific Tsunami Warning Center has advised that tsunami waves of up to a meter above the tide level are possible for some coasts of Papua New Guinea and nearby Solomon Islands. The quake, which was 25 miles northwest of Panguna, hit at 4:30 a.m.
Two hours later, the Pacific Tsunami Warning Center canceled tsunami threats for Papua New Guinea and the Solomon Islands.