Emergency services were called to the intersection of Gardeners Road and Bunnerong Road in Kingsford about 3.40pm on Tuesday.
Rescue crews "responded to reports a car had mounted a footpath, pinning a 12-year-old boy between the vehicle and a tree," NSW Police said in a statement.
The boy was released about 40 minutes later but sustained serious injuries in the crash.
He was taken by ambulance to Sydney Children's Hospital in a serious condition.
The 17-year-old driver was uninjured and has been taken to Prince of Wales Hospital for mandatory testing.
Footage taken at the scene about 4pm showed a white car bearing a red P-plate on the footpath alongside Gardeners Road.
Dozens of police officers, an ambulance and a police rescue vehicle were also on site.
The car could be seen within metres of a bus stop and a pedestrian crossing while one officer spoke with a group of school children sitting nearby.
A crime scene has been secured which will be examined by specialist police.
Major traffic delays continue and motorists are urged to avoid the area.
Police are urging anyone who may have witnessed the crash or has any dashcam or mobile phone footage to contact Maroubra Police Station or Crime Stoppers on 1800 333 000.
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