The scale of Cyclone Yasi is largely unknown, as officials and residents holed up while the tempest raged.
The Bureau of Meteorology said the destructive core of the cyclone hit the coast a few minutes after midnight at the small resort town of Mission Beach in Queensland state.
Officials had said Yasi's winds could gust up to 186 miles an hour. People are huddling in emergency shelters or at home as they brace for the worst over the next several hours.
"This is a cyclone of savagery and intensity," Prime Minister Julia Gillard said in a nationally televised news conference as the storm moved toward the coast. "People are facing some really dreadful hours in front of them."
The storm could cause the sea to surge inland and flood some places to roof level, according to officials.
The Associated Press contributed to this report.