At least five people are known to have died and tens of thousands of people have been evacuated.
The quake struck at 20:46 local time (23:46 GMT) about 86km (52 miles) north-west of the mining area of Iquique, the US Geological Survey said.
Waves of up to 2.1m (6ft) have hit some areas and there have been power cuts, fires and landslides.
The government said the declaration of a disaster in the regions of Tarapaca, Arica and Parinacota was aimed at "avoiding instances of looting and disorder".
President Michelle Bachelet said the country had "faced the emergency well" and called on those in affected regions "to keep calm and follow instructions from the authorities".
She is due to visit the affected areas later on Wednesday.
Prison break
Chilean TV broadcast pictures of traffic jams as people tried to head for safer areas.
Officials said the dead included people who were crushed by collapsing walls or died of heart attacks.
The interior minister also told Chilean TV that some 300 women inmates had escaped from a prison in Iquique.
Officials later said that 26 of them had been recaptured.
Chileans on the coast evacuated to higher ground
Streets across Peru and Chile were deserted following the tsunami alert
Hundreds of thousands of Chileans are spending the night away from their beds because of the evacuation order
People take refuge in the Chilean coastal city of Antofagasta
'Ghost town'
A British expatriate near the northern Chilean city of Antofagasta told the BBC that there had been several tremors since the last quarter of last year.
"But this earthquake, even with the increased distance, seemed to last a lot longer," Patrick Moore said.
"I knew it was bad so I immediately went online to see what had happened and saw a tsunami warning that's been put in place which confirmed my fears that it was a big one."
President Michelle Bachelet urged people to "do all they need to ensure they and their families stay safe"
President Michelle Bachelet urged people to "do all they need to ensure they and their families stay safe"Kurt Hertrampf, a hostel owner in Arica, told the BBC there was a big blackout in the town after the quake and he was surprised the telephone line was still working. He added: "Downtown looks like a ghost town."
The area close to the epicentre is mineral rich, but none of the major copper companies reported any break in production.
Chile is one of the most seismically active countries in the world.
Central and southern areas of the country were hit by a powerful earthquake of 8.8 magnitude followed by a tsunami that devastated scores of towns in February 2010. More than 700 people were killed.
In 1960 an area of Chile south of Concepcion was hit by a 9.5 magnitude which caused about 1,655 deaths and a tsunami in Hawaii and Japan.
The 9.0 magnitude quake that struck Japan on 11 March 2011 caused a devastating tsunami and left more than 15,000 people dead, with more than 3,200 missing.