The Jakarta stock exchange, which ended down 2.4 percent, saw its steepest loss in a day since November 2011, dragged down by financials.
Investors are slowly reducing US dollar-funded carry trades in emerging markets after a broad rally of the benchmark currency was fuelled by worries over inflation and bond supply in the United States and a subsequent spike in Treasury yields.
US benchmark 10-year Treasury yield rose to 3 percent for the first time in more than four years on Tuesday.
Foreign investors have been dumping riskier assets and the outflow in April was close to 7 trillion rupiah, said Taye Shim, head of research at Mirae Asset Sekuritas.
"I think primarily the key reason is that the central bank of Indonesia is maintaining a stubbornly low dovish stance in terms of their monetary policy," he said.
Indonesia's index of 45 most liquid stocks fell 3.2 percent.
Philippine shares closed at their lowest in over a year as industrials weighed on the index. Index heavyweight SM Investments Corp, which was the biggest drag with a 1.4 percent fall.
Industrials and financials dragged the Singapore stock exchange 0.5 percent lower. The city-state's biggest lender DBS Group Holdings shed 0.7 percent, while Keppel Corporation slipped as much as 3.2 percent.
Malaysian shares fell 0.7 percent to close at their lowest in over two weeks as financials faltered. Public Bank Bhd fell as much as 1.2 percent.
Thai shares ended down 0.5 percent.
Vietnam was closed for a holiday.