The crash happened just outside Stranraer, Dumfries and Galloway, shortly before 2pm.
Police said the driver of the car, an 18-year-old man, from Newton Stewart, was taken to the Southern General Hospital in Glasgow.
The train passengers were taken to a triage centre in Stranraer, where their condition was assessed, although they are not thought to have serious injuries.
The car driver was the only person inside the vehicle, a Mitsubishi Shogun 4x4.
Dumfries and Galloway Constabulary said the incident happened on the Kilmarnock to Stranraer line and involved a train with two carriages, the 11.42am Glasgow Central to Stranraer service.
Fire, police and ambulance crews attended the scene in the Dunragit area. The crash blocked the train line and damaged the car extensively, police said.
A force spokesman said: "Just before 2pm a train collided with a car at a level crossing just outside Stranraer.
"The driver of the car has been taken to the local hospital but is now going to the Southern General Hospital with what are believed to be fairly serious injuries.
"The train passengers are on the way to Stranraer to be checked over. An investigation will be carried out into what happened."
ScotRail said the driver of the train and one passenger were treated for shock, while the other eight passengers have no immediately reported injuries.
Services to and from Stranraer are expected to be disrupted for the rest of the day, with no trains going in or out of the town.
A ScotRail spokeswoman said: "We have arranged replacement transport on this route for the remainder of the day, and apologise for the inconvenience while investigations continue. We would encourage customers to check scotrail.co.uk/disruption for the latest updates."
The Rail Accident Investigation Branch said it would be carrying out preliminary checks at the site to determine whether a full investigation is necessary.