Dramatic footage shows a 4 x 4 vehicle pulling out of a junction on A682 Manchester Road, close to the entrance to Clowbridge Reservoir, as the X43 bus to Manchester is approaching, coming from Burnley.
The two vehicles collide and in the impact the bus driver steers his vehicle to the opposite side of the road to rest on a grass verge.
Two air ambulances, two rapid response vehicles and a senior clinician were sent to the scene and three people, including the bus driver, were injured. Two of the casualties were taken to the Royal Blackburn Hospital and a third person was rushed to the Royal Preston Hospital.
The bus driver was later released home to his relieved family after the accident just after 1pm on Sunday.
His daughter said: "He is amazing and we are so proud of him but he is still in shock."
The driver of the vehicle, whose dashcam footage, captured the crash, described the moments leading to the collision when he realised what was going to happen.
He said: " The second I saw the car pull out in front of the bus I began to slow down, even though part of me didn't believe it was happening.
"Then, after checking there was no-one behind me and realising that the bus wasn't going to magically stop, I slammed on fully.
"If I had been speeding or not paying full attention to the road it could have been a very different outcome.
"I don't know if the bus headed off to the right because of the impact with the car or because the driver wanted to avoid us but that guy is a hero."
The driver, who asked not to be identified, added that the incident had been traumatic for both himself and his partner who was in the car with him and made the 999 call to the police.
He added: "I can't begin to imagine what it was like for the driver of the bus and the passengers on it."
Lancashire Police confirmed they were called to the crash and an investigation is underway but no arrests have been made.