An eyewitness said firefighters had to physically remove the man from a crossing outside a school in Luton, as he continued to help children cross.
The fire engine was on its way to an out of control bonfire on St Ethelbert Avenue, at about 15:30 BST on 13 April.
Luton Borough Council said it has requested CCTV footage from the fire service.
Jacqui Brittain said she saw the fire engine coming down her road, with its lights on, from her bedroom window.
She said he continued to help one group of children from William Austin Junior School cross the road but to her surprise then started a second crossing.
"He just continued to cross them," she said. "He came out into the middle of the road and was ushering them across the road.
"Four of five firemen got out of the vehicle and escorted him off the road.
"It was like watching a car crash."
A spokesman for the council said the man would be suspended while an investigation into the incident was carried out.
"It is vital that emergency services are able to reach their destinations quickly and freely and we have begun an immediate investigation in line with council procedures," he said.
Bedfordshire Fire and Rescue Service said the lollipop man ushered "children and their parents across the road several times in front of the fire appliance".
A spokesman said: "A firefighter spoke to the crossing guard and moved the remaining pedestrians out of the road before assisting other vehicle drivers to clear a path so we could continue to the incident."
A lollipop man has been suspended after claims he stopped a fire engine on its way to a 999 call.