Traffic cameras in the area have captured the incident at Latrobe Terrace. (VicTraffic)

Two people have been arrested after an allegedly stolen car was driven towards police after crashing into a school bus in Geelong, prompting police to shoot at the vehicle.

Footage posted to social media this afternoon shows the car reversing into the bus before driving in the direction of at least one officer.

Young children can be heard screaming as two shots ring out.

The ABC understands students from Sacred Heart College and St Joseph’s College were on the bus.

The Kia Optima, alleged to have been stolen from New South Wales, was spotted by a police helicopter near the intersection of Princes Highway and Roebuck Street in the Geelong suburb of Newtown about 3:40pm.

Victoria Police confirmed officers shot at the car as the alleged offenders tried to flee.

“The Kia is alleged to have driven at officers, who have discharged their firearm, before it collided with another vehicle,” a police spokesperson said.

A man and woman, both aged 37, allegedly tried to flee on foot but were arrested nearby.

Witness Shane Griffiths was driving along Latrobe Terrace on his way home when he pulled up at the traffic lights, then heard gunshots.

“I had the windows down and then bang, bang; heard at least two gunshots,” he told ABC radio.

“It certainly took me by surprise, and I looked around at the cars and everyone seemed a bit sort of shocked.”

Mr Griffiths said he was about four cars back from the intersection and was not sure whether to jump out and run further away, but ended up remaining in his vehicle.

He said about 20 police cars arrived on the scene, and he saw a man handcuffed near an ambulance.

“He looked a bit battered and bruised.”

The alleged male offender sustained a gunshot wound to the arm and was taken to hospital under police guard with non-life-threatening injuries.

The woman was also taken to hospital with minor injuries.

A female driver from another vehicle also suffered minor injuries and was taken to hospital.

Latrobe Terrace was closed in both directions between Ryrie Street and McKillop Street at about 4pm.

VicTraffic has advised of long southbound delays from Church Street overpass and northbound from Fyans Street.