The crash occurred at the intersection of King Street and Fernbrook Way in Templestowe about 12pm.
The male driver of the car died at the scene, while the male bus driver was taken to the Royal Melbourne Hospital with serious lower body injuries.
Victoria Police Senior Sergeant Brad Peters said police were still piecing together what went wrong.
“Looking at the scene it would appear at this stage that the bus is on the correct side of the road and the 4WD drive isn’t for some reason,” he said.
“The potential for this to be a major, catastrophic incident is understated.”
Three passengers who were on the bus at the time of the crash were left with minor injuries and were treated by paramedics at the scene.