Police who were chasing a car which failed to stop asked the driver of the school bus to position the coach across the road as the vehicle approached.
The bus was carrying 50 pupils – some as young as five. Thankfully none were hurt.
The incident in Appleby, Cumbria – home of the famous traveller fair – is under investigation by the local Police and Crime Commissioner, reports the Daily Mail.
The BMW, which police were chasing, is reported to have slowed as it approached the school bus, but crashed into it at slow speed as it tried to pass.
Steven Quinn, 31, of Newcastle-upon-Tyne, has been charged with dangerous driving, having no insurance, driving otherwise than in accordance with a licence and handling stolen goods.
Amanda Daldry, 43, said her daughters Holly, 15, and Jessica, 13, were on the bus. She told local reporters: "The kids were filled with adrenaline with what had happened. Excited would be the wrong word. They were agitated. The older ones realised what was happening.
"Depending on which side of the bus they were on, some of them saw the car approaching. They should not have used a school bus. What would they have done if some of the kids were seriously hurt?'
Her daughter Holly, added: "At first I thought our driver was reversing to turn around but we were waiting for a few minutes and then there was this big thump.
"We didn't see the car coming because we were on the other side. The little kids started crying and thinking they were all going to die."
The children said they were not told why the bus had been stopped, but were told they could not leave the vehicle.
Cumbria Police said the car they were pursuing was heading for a road behind the bus, which was thronged with spectators, horses and children. It is not thought the driver was attending the annual travellers' fair.
A police statement said: "This request was made by police and was not done to totally block the road but placed in a position for the driver to slow down. Room was left for him to drive past the rear of the bus."
Police met head teachers Rachel Pearson, of Appleby Primary School, and Andy Lund, of Appleby Grammar, this week, but neither school or the coach company, Grand Prix Coaches of Brough, have commented on the incident.