"It was smoking and a strange liquid was leaking from it," a resident of the small town of San Luis said.
Police have since identified the object as an internet balloon developed by X, a company founded by Google, to boost the signal in rural areas.
It is not yet clear what caused the balloon to crash.
'From outer space'
Tolima police commander Jorge Esguerra denied previous reports on Twitter and local media which had described the object as a satellite.
"It's a technological device used by Google which moves around and is held aloft by a balloon," he explained, adding that it formed part of X's Project Loon.
X, which was formerly known as Google X, is using the devices to extend internet connectivity to people in rural and remote areas by having the balloons, which travel on the edge of space, relay the signal.
But many people in the rural area near San Luis where it crashed said they were convinced it was something more sinister.
"We all thought it was a UFO or the remains of a space craft," locals told El Tiempo newspaper.
It is not the first time a Project Loon balloon has crashed.
In February 2016, one came down at a tea plantation in Sri Lanka during a test flight.
Google balloon mistaken for UFO as it crashes in Colombia
15 March 2017
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Farmers living in central Tolima province in Colombia say they were terrified when an object they took to be a UFO crashed in a field on Sunday.
