It happened around 10 a.m. at the intersection of Person Street and Old Wilmington Road.
Witnesses said the driver of the bus smelled smoke prior to seeing flames on the bus. She then evacuated everybody off the bus, preventing any injuries.
"The bus driver did an amazing job," Fayetteville Fire Department Battalion Chief Joseph McLamb said.
McLamb said the bus had a hybrid engine that operate on fuel and propane. It's still unclear what caused the fire.
Wolfgang Strecker works near where the bus broke down. He saw the fire and started filming.
"I'm just glad everybody got out. What a disaster," Strecker said.
He also said one of the passengers on the bus was a woman who is 9 months pregnant. He said he opened his nearby office and allowed her to rest comfortably in the air conditioning after she evacuated the bus.
When firefighters finished putting out the flames, the bus had been destroyed.