Images and video footage shown by Chinese state media showed the bus falling into the hole, followed by a flash and smoke. Rescuers could be seen helping a person out of the sinkhole, from which only the rearmost part of the bus could be seen protruding.
Xinhua said more than 1,000 rescue workers and 30 vehicles have been dispatched to the scene. The accident occurred around 5:30pm (0930 GMT) on Monday in Xining, capital of Qinghai province, Xinhua said, adding that another four people were missing following the accident.
Xinhua said the hole was around 80 square metres in area and that the bus has been pulled out as of Tuesday.
Authorities were still investigating the cause of the accident and the victims have not yet been identified, Xinhua said.