Officials say someone poured gasoline into the spa on 129 Eldridge Street just before 5 p.m. Sunday and lit it on fire.
A fire broke out inside the spa, and three minutes after the 911 call, firefighters were on the scene.
Nick Gerard was leaving an eatery and was walking past the spa.
"The whole storefront was filled with black smoke," Gerard said.
He knew something was terribly wrong when he saw people running out.
"All of them had clothes burned off, covered in soot, coughing," he added.
Police say a 46-year-old man and a 60-year-old woman who were inside when the fire started were injured. They say the man ran down the street, throwing his burned clothes along the way.
"He was on fire - he took his jacket off and an EMS call came in about two blocks away for a burn victim, so they put it together," said FDNY Deputy Chief Joseph Schiralli.
Fire marshals are now investigating and looking into this as a possible arson.
Police say both victims were transported to Weill-Cornell Medical Center and are in stable condition.
Police are currently working on a suspect description. No arrests have been made.
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