Senior Constable Tony Hassett, from Camperdown Police, said the man had to be cut out of his red Holden Commodore after the accident at the intersection of Simpson and Baynes Streets, about 5.45pm.

A helicopter landed at the Terang Recreational Reserve and flew the driver to the Royal Melbourne Hospital.

Senior Constable Hassett said the Commodore was travelling south along Simpson Street when it was involved in a collision with a Nissan Patrol utility travelling along Baynes Street.  

Two people in the Nissan were not injured.

The driver of the Commodore was trapped for about half an hour by the legs before State Emergency Service volunteers could cut him free.

The two passengers in the Commodore, also from Warrnambool, did not suffer life-threatening injuries.

A 17-year-old male youth, who was a passenger in the back seat, was transported to the Terang hospital for treatment. 

A 21-year-old Warrnambool woman did not require hospital treatment.

Senior Constable Hassett said investigations into the cause of the accident were continuing. 

He said the Nissan suffered moderate damage while the commodore was described as an insurance write-off.

Both vehicles were towed from the accident scene, which was cleared by emergency service personnel by 7.20pm.