The earthquake was centered 15 miles from Port Olry and hit at a depth of 17 miles on Sunday, according to the US Geological Survey.
The Pacific Tsunami Warning Centre issued an alert for coasts within 186 miles of the epicentre.
“Tsunami waves reaching 0.3 to 1 meters above the tide level are possible for some coasts of Vanuatu,” it said.
The alert was withdrawn hours later, with authorities saying the threat had passed. There have been no reports of damage or casualties so far.
Posting to Facebook, the French embassy in Vanuatu advised people to stay away from the coastline.
Meanwhile, New Zealand’s department for civil defence said in a statement on social media: “There is no tsunami threat to New Zealand following the M7.2 Vanuatu region earthquake.
“Based on current information, the initial assessment is that the earthquake is unlikely to have caused a tsunami that will pose a threat to New Zealand.”
Al Jazeera reports that some Vanuatu residents fled to higher ground after the warning was first issued.
The Pacific Island nation is home to about 280,000 people and is prone to natural disasters, with six active volcanoes, regular cyclones, and earthquakes.
It sits on the Pacific “Ring Of Fire”, a belt of seismic faults around the Pacific Ocean where earthquakes and volcanoes are frequent.
The region houses more than 450 volcanoes, including three of the world’s four most active volcanoes – Mount St. Helens in the US, Mount Fuji in Japan, and Mount Pinatubo in the Philippines.
The Ring of Fire provides the backdrop to 90 per cent of the world’s earthquakes and 80 per cent of the biggest quakes.
In November, the nearby islands Solomon Islands was hit with a 7.0 quake. There were similarly no reports of serious injuries or damages.
At the time, coastal regions of neighbouring Papua New Guinea were put on alert for tsunami waves of up to 30cm (12 inches).