Hawaii County Civil defense said all 1,900 residents of the Leilani Estates and Laipuna Garden areas have been evacuated.
The dire warning further stressed the severity of the situation, underlining the gas could affect "the entire exposed population".
Authorities recommend leaving the area and seeking medical attention if severely affected.
Hawaii's tourism industry has taken a $5 million hit as Kilauea volcano continues to blanket Big Island with destructive lava.
There was "an immediate impact" after the Kilauea volcano first erupted on May 3.
Officials added the residents should leave the area of volcanic activity, avoid outdoor activities, drink plenty of fluids, avoid smoking, close windows and recirculate the air conditions when smog levels are elevated.
Almost 20 fissures have opened in and around the Lanipuna Gardens and Leilani Estates neighborhoods.
The volcano, located on the U.S. state's Big Island, is one of the world's most active volcanos. A handful of cruise ships have also decided not to come into port even in Kona on the west side of the island, about 80 miles away from the volcano.
"There was a really thick layer of dust on our cars, and on our decks, and such so you can see and feel it", she said.
Officials have ordered evacuations for about 2,000 people since Kilauea volcano began shooting lava into a residential neighborhood. Since the beginning of outflow of lava, as many as 18 active volcanoes around the region also began to show some activity. Officials hope to reopen the highway Tuesday morning to local traffic.
Motorists are advised to drive with caution as metal plates will be placed over the cracks on the roadway, according to the agency.
United States Geological Survey is concerned pent-up steam could cause a violent explosive eruption at the volcano crater, launching a 6,100-metre plume that could spread debris over 19 kilometers (11.8 miles), Reuters reported.