A stolen vehicle crossed onto the wrong side of the freeway before colliding with an oncoming vehicle in Trafalgar on Sunday morning.
Police said a 17-year-old boy from the South Gippsland area fled the scene before being arrested nearby.
The occupants of the second vehicle, a family of five from Trafalgar, were treated at the scene for minor injuries by paramedics.
Police said officers attempted to stop a white Toyota RAV4 on the Strzelecki Hwy near Mirboo North at about 10am. It is alleged the RAV4 was one of two vehicles stolen from Leongatha Primary School earlier that morning. They were possibly travelling together.
No pursuit was undertaken but the vehicle was monitored by police. It was observed in the Morwell township at 10.50am and Moe township just after 11am.
Police successfully deployed a tyre deflation device in Newborough. Despite damage to multiple wheels, the vehicle entered the Princes Fwy and travelled towards Trafalgar.
At the Kennys Rd intersection, police allege the stolen vehicle crossed into the east bound lane of the freeway but continued travelling west. The vehicle lost control before colliding with a Toyota Prado travelling east at about 11.30am.
The boy, the sole occupant, fled the scene. He was located and arrested in Waterloo Rd shortly afterwards and transported to Latrobe Regional Hospital with injuries.
He is yet to be interviewed by police.
Police reported the second stolen vehicle from Leongatha, a Toyota Camry, wasn't involved in the Trafalgar collision. It was seen in the Latrobe Valley before evading police in South Gippsland on Sunday night. It was located in Carrum Downs at 1am yesterday.
Anyone who witnessed the collision, has dashcam footage or any other information that could assist police is urged to contact Crime Stoppers on 1800 333 000.