Residents of Rome, some 170 km (105 miles) from the epicentre, were woken by the quake, which rattled furniture and swayed lights in most of central Italy.
The European-Mediterranean Seismological Center put the magnitude at 6.1 and said the epicenter was northeast of Rome, near Rieti.
The first quake struck shortly after 3.30 am (0130 GMT), according to the United States Geological Survey, and a 5.4-magnitude aftershock followed an hour later. Rescue workers were preparing to take to the air in helicopters to assess the damage at dawn.
Amatrice's mayor, Sergio Pirozzi, said its best-known accommodation, Hotel Roma, which probably had around 70 guests at the time of the quake, had collapsed and only seven bodies had been found under the rubble.
Italy's State Forestry Corps tweeted footage of a rescue operation underway in the rural town of Capodacqua, where a woman's arm can be seen beneath the debris.
Mayor reported a family of four trapped under the debris without signs of life and another said simply: "The town isn't here anymore".
The hospital in Amatrice was among the buildings that were badly damaged, and patients were moved into the streets. The same underlying geology was responsible for the devastating 2009 natural disaster in the city of L'Aquila, just 34 miles (55 kilometers) away from today's quake. He added that the region is popular with tourists escaping the heat of Rome, with more residents than at other times of the year and that a single building collapse could raise the toll significantly. "We are living this huge tragedy", said the Rev. Savino D'Amelio, an Amatrice parish priest.
The main road into and out of the town was covered in debris, making rescue hard; residents were digging their neighbors out by hand.
Surrounded by rubble in the village of Arquata di Tronto, 65-year-old Altiero Cinaglia sounded fatalistic about bringing Japanese-style safety standards to creaking Italy.
The national Civil Protection Department said some survivors would be put up elsewhere in central Italy, while others would be housed in tents that were being dispatched to the area.
"To hear the mayor of Amatrice say his village no longer exists and knowing that there are children among the victims, is very upsetting for me", he said. He wept as he noted that the tiny hamlet of 700 swells to 2,000 in the summer months and that he feared for the future of the town.
"This slow stretching causes stress to build up in the earth's crust, which is then released in earthquakes just like this one", he said.
"We're digging, digging. hoping to find someone alive", he told the affiliate.
Earlier on Wednesday, the pope cancelled a scheduled speech at his weekly general audience on religious teachings and instead prayed with the crowd for victims and survivors.
Holding a rosary in his right hand, Francis told the crowd that he was stunned by the devastation of the magnitude 6 temblor that struck central Italy early Wednesday.