The IU Indy men's basketball team bus erupted in flames on the way home from a road game on Sunday ... but luckily, everyone made it out unharmed.

The terrifying incident happened after the Jaguars' 71-67 loss to the Northern Kentucky Norse at the BB&T Arena.

As the team and coaches took the two-hour ride back to campus, the bus suddenly caught fire on the I-275 loop near Lawrenceburg.

Several drivers passing by captured the chaotic moment on video ... showing the bus completely engulfed in flames.

Jaguars guard Paul Zilinskas posted video and images of the aftermath, showing the bus completely destroyed by the blaze.

The Jaguars were picked up by another bus ... and the IU Indy Athletics Department said all players and staffers made it out of the bus unharmed.

The school said the cause of the fire was due to a "mechanical issue."

IU Indy is currently 9-20 on the season ... and is off until their home game against Robert Morris on Thursday. The Jags will also host Wright State on Saturday to wrap their regular season before competing in the Horizon League Tournament next week.