The bus, which started its journey from Srinagar at 7 am with 14 passengers on board, was stopped by the army at Bandi in Uri tehsil of Baramulla district, a police official said.
He added that 25 persons were waiting to board the bus at the Salamabad Facilitation Centre to go to Muzaffarabad, the capital of Pakistan-occupied Kashmir (PoK).
At 3 pm, those waiting to board the bus at the facilitation centre and those on board were asked to return to Srinagar, the official said.
Army officials at the 15 Corps headquarters here refused to comment on the development.
The Srinagar-Muzaffarabad bus service, also known as the Karawan-e-Aman (peace caravan) was launched in April, 2005 on a fortnightly basis as a confidence building measure between India and Pakistan.
The frequency of the bus service for the divided families living on either side of the LoC, was increased subsequently. It now operates on a weekly basis.