The students were on their way to the snow from Barnsley Public School, near Lake Macquarie, and were 24km north of Cooma when the fire broke out.

It is not yet known what caused the blaze, which took about an hour to contain, but there were no injuries.

The Monaro Highway was reduced to one lane with the Cooma Fire Brigade, Rural Fire Service and police attending the scene.

Barnsley Public School teacher John Morris was travelling with another 36 students in a bus behind the one that caught fire and said immediate action was taken to ensure the students’ safety.

"We just pulled over and evacuated all the kids, as teachers we're trained to do that," Mr Morris said, "The bus wasn't important."

Cooma Rural Fire Brigade captain Tom Brown said there was a fair amount of damage done to the bus, which required towing.

"There's a flat tyre on the inside of the right hand side," he said.

"I don't know if that's what's caused the fire, but I suspect it would have been rubbing on the bus floor."

Another bus was called to take the students further, while authorities continued to clean up the blaze.