The category five storm, with winds of up to 300km/h (185mph), struck populated areas when it reached Vanuatu early on Saturday local time (+11 GMT).
It is now moving down the east coast of New Zealand, but has weakened significantly.
In Port Vila, concrete buildings withstood the storm better but reports suggest as many as three-quarters of the capital's houses have been damaged or destroyed.
Government buildings, bridges and the main hospital have also been hit.
"There are houses that have been totally gutted, literally with a couple of timber frames still standing," Chloe Morrison, from the international children's charity World Vision, told the BBC.
There is major concern about islands to the south, including Tanna, which was in the direct path of the storm.
Many people in the region live in basic housing with limited communications which have now been severed.
Paolo Malatu, co-ordinator for the National Disaster Management Office, told the Associated Press news agency that planes and helicopters had been sent to fly over the islands and assess the situation.