The warning was issued at 12:40 p.m. local time [04:40 GMT].
"The No. 8 Northeast Gale or Storm Signal is in force. This means that winds with mean speeds of 63 kilometres per hour or more are expected from the northeast quarter. At 5 p.m., Typhoon Koinu was centred about 70 kilometres south of Hong Kong Observatory," the observatory said.
The Hong Kong Education Bureau has suspended classes in schools due to the level issued.
"Schools should implement contingency measures to ensure the safety of students," the bureau said.
Earlier in the day, the local media reported that the typhoon had disrupted flights to and from the city's airport. As of Sunday morning, at least 70 flights to or from Hong Kong had been canceled, the report said.