Kusatsu-Shirane, a 2,160-metre (7,090 ft) volcano, appeared to have erupted on Tuesday morning, the Japanese Meteorological Agency (JMA) said.
The Fire and Disaster Management Agency warned that rocks could be thrown as far as 2 km (1 mile) from the peak.
Video footage from the top of the resort's gondola showed black rocks plummeting through the sky, followed by a curtain of black smoke. A photograph taken at the site on national broadcaster NHK showed a gondola with a shattered window.
It was unclear whether the avalanche was caused by the volcanic activity, but they occurred nearly simultaneously. "Based on various measurements, we can say that the mountain appears to have erupted, but we are still trying to confirm facts on the ground," a JMA official said.
The warning level for the peak was raised to 3, warning people not to climb the mountain.
Four people riding a gondola on the slopes were injured by broken glass, chief cabinet secretary Yoshihide Suga told a news conference, but he had no further details.
Japan has 110 active volcanoes and monitors 47 of them around the clock. In September 2014, 63 people were killed on Mount Ontake, the worst volcanic disaster in Japan for nearly 90 years.