A police spokeswoman said officers were called to reports of a train colliding with a car at the crossing at Renfrew St, Grassmere, about 3.40pm yesterday.
The black Mazda Atenza sedan was shunted about 50m by the force of the impact.
A booster seat removed from the car was visible at the side of the train tracks as emergency services worked.
One witness said they heard the train sounding its horn moments before impact.
Another said three people who had recently moved into the area were in the car.
KiwiRail executive general manager operations Paul Ashton said the incident involved a shunting train hitting a vehicle on a level crossing fitted with flashing lights and bells.
A Fire and Emergency New Zealand spokesman said crews from Invercargill and Kingswell stations attended.
Fenz stopped trains on arrival and assisted to extricate one person trapped in the car, the spokesman said.
A St John spokesman said two ambulances and an operations manager attended and two patients were taken to Southland Hospital.
One was seriously injured and the other had moderate injuries, the spokesman said.
The crossing, which does not have a barrier arm, was closed while the services worked.
