The US National Hurricane Center in Miami downgraded Felix to a tropical storm, with winds of 95 kilometres per hour.
VIDEO: Felix aftermath
But this is little comfort to residents in poor, low-lying areas, who can expect life-threatening flash floods and mud slides before the storm rains out.
Tropical storm Felix was located 220 km west of Puerto Cabezas, Nicaragua, and about 200 kilometers east of Tegucigalpa.
Four people killed
A baby died shortly after birth in the worst-hit city of Puerto Cabezas, Health Minister Maritza Cuan said, adding that the girl's mother had refused to head to a shelter ahead of the storm.
One man was killed when his home collapsed on top of him and another died when he fell from a roof he was repairing as the storm rolled in, officials said.
The body of a man from the Sandy Bay coastal community was found floating in the ocean several hours after the hurricane roared ashore in north-eastern Nicaragua, packing maximum sustained winds of 260 kilometres per hour.
Neighbouring Honduras also braced for trouble as Felix headed its way as a much weakened hurricane but one that could still trigger massive floods and potentially deadly mudslides.
The storm rekindled bitter memories of Hurricane Mitch, one of the deadliest on record, which devastated the region and killed at least 9,000 people, most of them in Nicaragua and Honduras, in 1998.
"The situation is serious, but thank God the number of victims is not as high as those caused by Hurricane Mitch," Nicaraguan President Daniel Ortega said at a news conference, where he declared a state of emergency to direct aid to some 38,000 persons expected to become homeless.
"Puerto Cabezas is destroyed, everywhere there are smashed homes and churches, downed trees and power lines," Mr Francis said.
In a region where an estimated 200,000 people live in abject poverty, many of the city's owner-built homes were made of wood and tin.
Authorities said an airport control tower collapsed and several neighbourhoods were flooded.
More than 30,000 people in Puerto Cabezas reportedly did not heed calls to head to safety before Felix barreled ashore as a category five hurricane.
Authorities ordered 10,000 people to evacuate threatened areas of Tegucigalpa as revised forecasts indicated the hurricane would move much closer to the Honduran capital than initially thought.