About 12,000 homes collapsed in Ludian, a densely populated county located around 366 kilometers (277 miles) northeast of Yunnan's capital, Kunming, China's official Xinhua News Agency reported.
The magnitude-6.1 quake struck at 4:30 p.m. at a depth of 10 kilometers (6 miles), according to the U.S. Geological Survey. Its epicenter was in Longtoushan township, 23 kilometers (14 miles) southwest of the city of Zhaotong, the Ludian county seat.
Ma Liya, a resident of Zhaotong, told Xinhua that the streets there were like a "battlefield after bombardment." She added that her neighbor's house, a new two-story building, had toppled, and said the quake was far worse than one that struck the area in 2012 and killed 81 people.
"The aftermath is much, much worse than what happened after the quake two years ago," Ma said. "I have never felt such strong tremors before. What I can see are all ruins."
Xinhua said at least 175 people were killed in the quake, with 181 missing and 1,402 injured.
At least 122 of the dead were in Ludian, with another 1,300 people injured there, Xinhua reported. It said another 49 people died and 102 were injured in Qiaojia county.
News reports said rescuers were still trying to reach victims in more remote towns Sunday night.
Photos on Weibo, China's Twitter-like social media site, showed rescuers searching through flattened buildings and people injured amid toppled bricks.
Many of the homes that collapsed in Ludian, which has a population of about 429,000, were old and made of brick, Xinhua said, adding that electricity and telecommunications were cut off in the county.
The mountainous region where the quake occurred is largely agricultural, with farming and mining the top industries, and is prone to earthquakes.
Relief efforts were underway, with more than 2,500 troops dispatched to the disaster region, Xinhua said. The Red Cross Society of China allocated quilts, jackets and tents for those made homeless by the quake, while Red Cross branches in Hong Kong, Macau and neighboring Sichuan province also sent relief supplies.
Chinese state broadcaster CCTV said the quake was the strongest to hit Yunnan in 14 years.
In 1970, a magnitude-7.7 earthquake in Yunnan killed at least 15,000 people, and a magnitude-7.1 quake in the province killed more than 1,400 in 1974. In September 2012, 81 people died and 821 were injured in a series of quakes in the Yunnan region.
In May 2008, a powerful quake in Sichuan province left nearly 90,000 people dead or missing.