The crash happened shortly after 4:00 p.m. in the 800 block of West Cambria Street.
Witnesses say the bus driver slammed into a parked car and proceeded to run over several sections of metal fencing before slamming straight into the side of a house.
"He ran into the black car down there. He looked like he was trying to put on brakes but was unable to stop his vehicle," witness Myra Haynes said.
Four students were taken to a local hospital for observation. All are expected to be fine.
The Philadelphia School District say three are students at Henry Elementary, a fourth a student at Houston Elementary.
"The kids looked like they were fine, only one of the kids looked like he was injured or a little shook up," Haynes said.
"There were kids coming out of the back doors. The fire department got here quick. Thank God," witness Samuel Villanueva said.
It's unclear why the bus driver lost control of the vehicle.
He is employed by Durham School Service, the second largest school transportation provider in the country.
Witnesses claim they saw him on a cell phone.
However, police would only say the investigation is ongoing.
"The whole time you could see he was on the cell phone. That's what happens when you talk and drive," Haynes said.
The school district says the driver will undergo a drug test and will not be driving until those results are back.