Japan's benchmark fell by an unusually wide margin of 3.9 per cent and China's main index lost 4.3 per cent. Markets in Hong Kong, South Korea, Australia and Southeast Asia recorded similar declines.
The US Federal Reserve raised rates in September as the economy grows solidly.
The U.S. Treasury is due to release a currency report that some analysts suggest might change the official stance on China's exchange rate policy.
The blood letting was bad enough to attract the attention of US President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates. "I think the Fed has gone insane".
"Equity markets were pulverized today as investors remain in full out retreat and even the most pessimistic of equity bears are still in shock by the sheer magnitude of the move", Innes said. The "latest sneeze" from Wall Street "could morph into a global markets pandemic", he added. American crude headed back below $73 a barrel as Hurricane Michael threatened to slash fuel demand across the U.S. Southeast.
The shift higher in yields also threatens to suck funds out of emerging markets, putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the US.
The International Monetary Fund cut its outlook for global growth this week, citing interest rates and trade tensions. USA officials have accused China of meddling in its midterm elections and stealing trade secrets from its companies through spies.
Tokyo's Nikkei 225 gave up 3.9 per cent to 22,590.86 and the Shanghai Composite index lost 5.2 per cent to 2,583.46. The Kospi in South Korea fell 3.6% to 2,148.97. Australia's S&P/ASX 200 slipped 2.4% to 5,906.00.
Shares in Facebook, Amazon, Apple, Netflix and Google's parent company Alphabet - the so-called "Faang" stocks that have driven USA markets to all-time highs recently - all fell in NY trading.
Stock markets in America fell yesterday amid intensifying concerns about rising interest rates and government bond yields, with investors selling technology shares and moving into utilities and other safe-haven sectors.
Dow Industrial Average Futures were down by about 300 points, or 1.2 percent, in pre-market trading, implying a sharply lower opening on Thursday after falling more than 3 percent on Wednesday.
The technology-focused Nasdaq index fell by 4.1 per cent to 7,422.05, its biggest drop since the Brexit vote in June 2016, as shares in Apple and Amazon, the world's largest public companies, dropped by 4.6 per cent and 6.2 per cent respectively.
MSCI's broadest index of Asia-Pacific shares outside Japan plummeted 3.9 per cent to its lowest since March 2017. It has fallen 7.5 percent in just five days. Apple and Amazon, the two most valuable companies in the S&P 500, each had their worst day in two and a half years.
Francis Tan, an investment strategist at UOB private bank, believes the markets will likely pick up in the USA session.
"I think what happened was that we were a maximum elevation of risk appetite and maximum valuation of (U.S.) large caps and tech, so when you have that situation you are always vulnerable", said UBP macro and FX strategist Koon Chow.
The euro pushed up to $1.1565 and away from a low of $1.1429 early in the week.
The dollar slipped to 112.17 Japanese yen from 112.27 yen late on Wednesday.
Brent crude fell 1.9 per cent to $81.51 a barrel, while U.S. crude dropped 1.7 per cent to $71.93.
"Earnings are really important because that was part of the concern that sparked the sell-off", Darrell Cronk, president and chief investment officer at Wells Fargo Investment Institute, told Bloomberg TV in NY. Brent crude, the global standard, dropped 1.58 dollarsssss to 81.51 dollars a barrel.