The Category 2 storm was packing maximum sustained winds of 110 mph and moving west at 9 mph as it hit the southern coast near the town of San Juan de Nicaragua, the National Hurricane Center said.
The dangerous storm has already killed at least three people in Panama.
In Bluefields, Nicaragua, families evacuated homes along the coast as the storm neared.
Residents board boats to leave before Hurricane Otto arrives in Bluefields, Nicaragua, on November 23, 2016.
"It scares us, because we are human beings, and you can't play with nature," Bluefields resident Juliana Rojas told CNN en Español.
Bernardo Reina said he'd been stocking up on supplies and would be hunkering down when the storm hit.
"I am ready, with bags, with everything I need, with bottled water," he said.
Hurricane warnings have been issued for parts of Costa Rica and Nicaragua. Rainfall in the region could exceed 15 inches in some areas, producing life-threatening flash flooding and landslides.
While the Caribbean is one of the few areas with warm enough water to support a hurricane this late in the season, a storm making landfall this far south is extremely rare.
Otto's landfall location is the furthest south on record that a hurricane has ever hit in Central America, forecasters said.
Otto is the first hurricane to hit Nicaragua since Ida in 2009.
Hurricane season officially ends on November 30, and while the month does sometimes have named storms, the season is generally winding down. It's rare to see storms this strong strike this late in November.
Source: cnn
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