Investigators say that explosives were found inside the suspect's car following the collision.
The crash happened as the children were heading to school near Taft Elementary School. Three children were taken to the hospital in stable condition, according to officials. They're all expected to make full recoveries.
Investigators say the driver of the car, later identified by Santa Ana police as 26-year-old Jason Guzman of Valencia, had trespassed into Taft Elementary School just before the collision, at around 8:30 a.m. asking to use the restroom as he carried a backpack, and was escorted off campus.
School staff told Eyewitness News that Guzman did not seem well and was talking to himself. They said he appeared to be under the influence of drugs.
Guzman then drove off in a red car down Keller Avenue, officials say, and struck the three children on the sidewalk.
Surveillance video from a nearby home captured the red vehicle just before Guzman allegedly runs down the children.
"I saw a couple kids on the ground. One was in the middle of the street," said witness and resident Isaias Vazquez. "So I walk up to them to kind of like, just tend to them, see what's going on. As I walk up to them, I saw an individual with a knife just walking toward the group of people. Luckily, he turned away and went back to his vehicle."
Guzman was arrested by police moments later after officials say the 26-year-old stabbed himself in the stomach.
A resident that lives near where the crash happened told Eyewitness News that she heard a loud crash, and neighbors in the area were shocked when they came out and saw what was inside the suspect's car.
"We noticed a large knife in the passenger's side," Chathuri Kahaduwa said. "I'm not sure what happened, if he was attempting suicide or anything like that, but when he fell down, he had blood all over his stomach."
"After colliding with the children, he continued, the vehicle continued rolling and hit another vehicle. I believe that vehicle was parked," said Santa Ana Police Sgt. Maria Lopez. "Then he continued and finally came to a stop, and that's where our officers contacted him and the vehicle."
Police say the suspect was taken in an ambulance to a local hospital in unknown condition, and was injured by a self-inflicted knife wound.
During the search of the suspect's car, officers discovered a "suspicious incendiary device," and the Orange County bomb squad was called to assist, officials said.
Three other incendiary devices were located, according to the Santa Ana Police Department.
The elementary school was on lockdown for about three hours. Authorities eventually cleared the school campus and classes resumed.
Police say they don't know what the 26-year-old from Valencia was doing in Santa Ana.
Santa Ana police is working with the Santa Ana Unified School District Police Department and O.C. Sheriff's Department in this ongoing investigation.
No further details were immediately known.