One person has been taken to hospital after a minibus collided with the Puffing Billy tourist steam train in the Dandenong Ranges, about 55 kilometres east of Melbourne.

Ambulance Victoria said they were called to the incident at a level crossing at School Road in Menzies Creek about midday.

Four people were assessed and one person, a man in his 40s, was taken to Dandenong Hospital for treatment for chest injuries.

He is in a stable condition and is expected to be released from hospital soon.

Victoria Police are investigating the crash.

"We don't really know why yet, but that bus hasn't stopped in time before it's got to the train tracks and collided with the train," Sergeant Paul Phillips said.

"I think at the last minute the bus driver's realised he's not going to be able to avoid the collision and he's turned left to try to minimise what's going to happen and that's why it's ended up in the position it has."

One man has been taken to Dandenong Hospital for treatment, Ambulance Victoria said. ( ABC News: Jean Edwards )

The lights and bells at the level crossing were working at the time, he said.

Sergeant Phillips said it was lucky more people were not injured because there were only about 150 people on the train.

There were 16 passengers on the minibus.

"If there were a lot more people on it [the train] you usually find people are sitting up on on the ledge with their legs outside," he said.

"If that had have been the case and the bus collided with it, it could've been a lot worse."

There were no skid marks at the scene, Sergeant Phillips said, so the possibility of mechanical failure was also under investigation.

The tourists, who loaded on buses and taken back to the train station, will all be offered refunds.

The railway will be closed until damage to the train and the track can be assessed.

Puffing Billy CEO John Robinson said thankfully there were no serious injuries.

"Safety is of the utmost importance at our iconic heritage steam railway and we have procedures in place to mitigate further danger and to ensure the continued safety of all passengers on the railway," he said.

Last year the tourist steam train carried 484,000 passengers on a trip from Belgrave to Emerald, through Sherbrooke forest and across a heritage listed timber trestle bridge.