Cal Fire and Riverside County firefighters responded to reports of a hot air balloon down at the corner of Vino Way and Calle Cabernet around 7:44 a.m.
FAA spokesman Ian Gregor says there were six people in the gondola when the explosion occurred.
Authorities say one person was burned and two others were also seriously hurt. A fourth person suffered minor injuries. They were all transported to area hospitals for treatment.
Neighbors quickly ran to help.
"One lady was sitting on the ground and it looked like her hair was melting on her head. She was burned so bad, and then a few other people were badly burned," said a witness, who only identified herself as "Ashley."
It is still unclear what caused the explosion. The Federal Aviation Administration and National Transportation Safety Board are investigating the incident.
City News Service contributed to this report.