Police have made contact with the boy, and they believe he's unharmed.
Authorities say the suspect, identified as 65-year-old Jimmy Lee Dykes, boarded the bus just after 3:30 p.m. local time Tuesday while some children were being dropped off in the small town of Midland City. A girl who was on the bus told ABC News Radio that the man handed the driver a note.
"And then I don't know what happened after that but he started telling them he needed a kid because of the law coming after him," she said.
Dykes then shot the driver, grabbed the child and fled. The suspect and the boy are in an underground bunker behind his home. There has been some cooperation by the suspect. The child needs medication daily, so Dykes directed authorities to deliver it through a PVC pipe to the bunker.
There were 22 students on the bus when the attack happened. SWAT officers and the FBI continue their efforts to convince a murder suspect to release his young hostage and surrender.
Neighbors described Dykes as being paranoid and combative. He is a military veteran in his 60s, a police source told ABC News. Neighbors say the man holding the boy hostage once beat a dog to death with a lead pipe and threatened to shoot kids who set foot on his property.
According to neighbors, Dykes moved to the area about two years ago and built the bunker himself. The hideout has food, electricity and a TV hook up, according to an official briefed by investigators.
Dykes was scheduled to be in court Wednesday for a trial related to charges of menacing some neighbors as they drove by his house weeks ago. Claudia Davis said he yelled and fired shots at her, her son and her baby grandson over damage Dykes claimed their pickup truck did to a makeshift speed bump in the dirt road. No one was hurt.
Witnesses say the 66-year-old bus driver, Charles Albert Poland, Jr., tried to fight off Dykes before the fatal shot was fired. Poland was hailed by School Superintendent Donny Bynum as a hero who gave his life to protect the students.
Negotiations continue, and it appears authorities are in no rush to execute any rescue attempt if there is any hope they can get him to surrender. On Wednesday night, officials said the young boy asked for a coloring book, and one was lowered down into the underground bunker for him.
Members of the community held a vigil, praying for the young boy's safe return. The Dale County School District has decided to cancel classes for the rest of the week.
ABC News and The Associated Press contributed to this report.