Tremors have been reported, and there are indications that magma is rising to the surface, the officials say.
More than 1,000 people died when Mount Agung last erupted in 1963.
"There should be zero public activity within the specified radius in case there is an eruption," Sutopo Purwo Nugroho of Indonesia's National Disaster Management Agency was quoted as saying by Reuters.
Bali's international airport in Denpasar, which is used by millions of foreign tourists each year, is currently operating as normal, the officials say.
Mount Agung, which is more than 3,000m above sea level, lies in the eastern part of Bali.
It is among about 130 active volcanoes in Indonesia - an archipelago prone to volcanic eruptions and earthquakes as it sits on the Pacific "Ring of Fire".
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