It has happened on the A1018 at the junction between Dame Dorothy Street and Church Street North.
Northumbrian Water workers and vans have been spotted at the scene along with police officers.
Some delays are expected for motorists.
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Sunderland University's communications department said that bus services are affected.
The department tweeted: "Due to burst water main on St Peter's Way, Service 700 is unable to serve normal stops on this loop.
"A diversion route is in place and a temporary stop near to the junction of Charles Street and St Peter’s Way.
"Customers should use temporary stop at junction of St Peter's Way."
A spokesman for Northumbrian Water said: "At 12.15pm we were made aware of a burst water main in St Peter's Way.
"Our crews are at the site investigating the cause and assessing the required repair work.
"Customers in the area may experience low pressure and disruption to supply while this is carried out.
"A small section of the road is currently closed to allow us to carry out the work and local diversions have been put in place.
"We currently have no time for completion of the work but there will be information on our social media channels.
"We want to apologise for the inconvenience caused and want to thank customers for their patience.
"We can assure that while there is damage to the road surface there is no sinkhole."