Huge waves churned up by the world's strongest earthquake in two years swallowed settlements on a remote island of Indonesia, wiping out hundreds of homes and leaving an estimated 10,000 persons homeless, reports ports from the area said today.

Authorities said they feared heavy casualties, but there were no immediate official reports of a death toll. Unconfirmed reports said about 100 persons died Wednesday when waves crashed ashore on the island of Yapen after the undersea earthquake, which measured 8.0 on the open-ended Richter scale and 7.9 on the 10-point Richter scale.

Government authorities were anxiously awaiting word on the fate of an estimated 60,000 people living in the area, mostly in settlements of stilt huts, along the coast.

First reports said the earthquake plunged half the town of Ansus into the sea. The town, inhabited by about 8,000 people, is located on Yapen Island about 2,300 miles east of Jakarta.

Officials at Indonesia's geological institute in Bandung said the epicenter of the earthquake appeared to have been located off the northern coast of Irian Jaya, the easternmost province of Indonesia that comprises the western half of the island of New Guinea. They said the center was just south of the island of Biak, an administrative outpost for the region that has a small international airport.

A policeman reached by telephone in the town of Biak said that when he felt the earthquake, he joined hundreds of people running into the streets in panic. Despite the intensity of the quake, however, the town escapted serious damage, he said.

Authorities in Iran Jaya's largest city, Jayapura, located about 310 miles east of the epicenter and about 2,500 miles east of the Indonesian capital, said the hardest hit area appeared to be Yapen Island, directly south of Biak, and northern coastal areas of Irian Jaya south of Yapen.

The province is one of the world's most primitive, populated by tribes that live in near Stone Age conditions. It is most noted as the place where Michael Rockefeller, a son of the late Nelson Rockefeller, disappeared and was believed devoured by cannibals in 1961. Only about 1 million of Indonesia's 140 million inhabitants live in Irian Jaya.

Because of the lack of communication facilities, authorities said it might be days or even weeks before the full effects of the earthquake can be determined. Meanwhile, the Indonesian Red Cross said it was preparing to mobilize food and medical supplies for shipment to Irian Jaya if requests come in.

One government worker in Jayapura said by phone that the homeless were being housed in army barracks. The province, formerly Dutch New Guinea, was absorbed by Indonesia in 1969 after a long political fight and ground battles with rebels demanding an independent state. The Indonesian Army continues to maintain troops in parts of Irian Jaya.