Both vehicles careened off State Highway 6 and into dense rainforest.
Police at the scene said the crash appeared to have happened as the Mercedes performed an overtaking manouevre on a straight stretch of road heading south.
Emergency Rescue personnel from Makarora, Lake Hawea, and Wanaka rushed to the accident to be met by chaotic scenes of dazed and injured tourists milling about on the roadside.
Two occupants from the Kiwi Experience bus and the elderly passenger in the Mercedes were taken by helicopter to Dunedin hospital for treatment to their serious injuries.
The car driver was taken by ambulance to the Wanaka Medical Centre.
Other, non-injured tourist bus passengers were taken to the Makarora Wilderness Resort cafe to rest and wait for a replacement vehicle be arranged to transfer them to Wanaka.
Commercial Vehicle Investigation Unit (CVIU) inspectors would launch an inquiry to determine the cause of the crash, police said.
