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 367 people were killed in the quake, with 1,881 injured.
Most of the deaths 357 were in Zhaotong City, Xinhua said. Another 10 people were killed in Quijing City.
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.
U.N. Secretary-General Ban Ki-moon offered "his condolences to the Chinese Government and the families of those killed," according to a statement from his office. The statement said the U.N. is ready to "lend its assistance to efforts to respond to humanitarian needs" and "to mobilize any international support needed."
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.
Associated Press researcher Henry Hou contributed to this report.