Footage showed people at a bus stop running from the collapsing road, as the bus, jutting into the air, sank halfway into the ground.
Several people disappeared into the sinkhole as it spread, including what appeared to be a child.
The incident, outside a hospital, also triggered an explosion inside the hole, video footage showed.
Search and rescue work was underway and the cause of the accident was under investigation, the state-run CCTV broadcaster said.
The incident occurred at around 5:30pm local time on Monday in Xining, the capital of Qinghai province, CCTV said, adding 16 people had been taken to hospital.
Sinkholes are not uncommon in China, where they are often blamed on construction works and the country's rapid pace of development.
In 2016, at least three people fell into a huge sinkhole in central Henan province, which swallowed a section of road and passersby.
An initial investigation showed the collapse might have been caused by water pipes buried under the road breaking up due to the rain.
In 2013, five people died when a 10-metre wide sinkhole opened up at the gates of an industrial estate in Shenzhen.