The road has been closed by Police as fire crews extricate the female driver of one of the vehicles.
Ambulance crews from the Isle of Wight Ambulance Service are also on scene attending to the casualties.
The incident occurred at just after 17:20.
Southern Vectis say Routes 3, 4 and 9 heading towards Ryde Bus Station, which would normally use Union Street, are now diverting via West Street and St Thomas’ Street until further notice.
All outbound buses are not affected by the closure, but delays are likely.
Motorists are advised to avoid the area.
UPDATE @ 18:05 – The Route 9 bus at 18:00 Newport to Ryde and the Route 9 at 18:35 Ryde to Newport are not operating due to the incident.
UPDATE @ 18:10 – 1 female casualty has been cut free from her Mini Cooper and is now in the care of the Isle of Wight Ambulance Service.
Her sister is also being checked over by paramedics.
The second car involved in the incident, a Toyota Yaris, has received minor damage and is being driven away from the scene.
UPDATE @ 18:40 – Union Street has now reopened to traffic.
Emergency services have stood down, however 1 Police unit remains on scene awaiting recovery of the Mini.