Two fire trucks and eight firefighters rushed to the scene at about 8.45am after the blaze broke out on the corners of Terralong and Collins streets.

Thirty three children and the driver were safely rescued from the flame-engulfed coach, which was completely gutted.

A school bus has been torn apart by a furious fire on Thursday morning in Kiama, south of Sydney. Picture: Daily Telegraph/Supplied

The council had advised locals to avoid the area as the firefighters battled the blaze, which took about 15 minutes.

Kiama Municipal Council appointed Avcon, a waste management service, to ensure the storm water runoff after the incident was managed safely to minimise pollution to Black Beach.

HAZMAT crews arrived on the scene to manage the diesel spill from the bus, which was carrying 200 litres at the time it caught fire.

FRNSW said at this stage the fuel tanks remained intact, and an assessment of the local drains revealed no contamination following the fire.

“Heavy tow services were arranged to remove the vehicle from the area, and alternative transport was organised for the children,” FRNSW said in a statement.

Fortunately, all passengers, including the Kiama Coaches driver, managed to escape the blaze. Picture: Fire Rescue NSW

Superintendent Adam Dewberry said the cause of the fire was being investigated.

“It’s still smouldering so we’ll let it cool down more before moving into investigation and recovery,” he said.

“The information we get from the driver will be important as well as the observations of what our responding firefighters saw to get an idea of how it did start.

“The kids are safe, some would’ve been a bit excited and a bit put out but we’ll look after them as best as possible.”

A NSW Police spokesperson told SkyNews.com.au the fire was not being treated as suspicious.