The bus carrying students to Baba Reshi shrine near Gulmarg fell into the gorge at Nambal Nard near Tangmarg, a police officer said.
He said rescue teams immediately swung into action and managed to evacuate 53 persons -- students and staff members -- to a hospital.
However, two of the injured - a teacher and a student - were declared dead in hospital, the officer said.
He said condition of five of the injured was stated to be "critical".
The school bus belonged to Iqra Education Institute situated in Khumriyal village in Kupwara district.