The blaze was apparently caused by a spark when the driver of the dual-fuel van switched from gas to petrol, he said, adding that the fuel gas cylinder was intact. The children were aged between five and 15 years, he said, adding that a female teacher also died.
The driver, who fled and left the van in flames, has been arrested in the nearby city of Kharian, police official Abid Khan said.
Initial information said the driver had also kept petrol in a plastic bottle, as reserve fuel for emergency use, which may have contributed in intensifying the fire, he added.
The dead included three children of police constable Mohammad Riaz, and the dead teacher was their aunt, residents said, adding that thousands of people attended their funeral.