Police said they were looking into his psychiatric history after he told officers as they arrested him he heard voices telling him to hurt someone, local media said.
According to local media reports all three students hit by the auto were Chinese.
As the Europe 1 television network reported, the incident happened at the exit of Lyceum-college St. Exupery.More news: Saudi Arabia pushing Israel into war with Hezbollah and Iran
Two people have reportedly been seriously wounded while all the injured are said to be of Chinese origin.
The source said that the 28-year-old driver told police he had acted "deliberately", but was not on a list of known extremists. BBC quoted some unconfirmed reports that he may be suffering from major psychological problems.
All three victims, who are thought to be Chinese and aged 22 and 23, have been taken to a hospital in Toulouse for treatment.More news: Dolphins Trade Ajayi To Philadelphia
The Mayor of Toulouse, Jean-Luc Moudenc took to Twitter and said: "Very shocked by the aggression against the students in Blagnac". He offered support to the injured students and their families. There are fears of a terrorist attack.
France has experienced a rash of vehicular terror attacks inspired by the Islamic State group, but there has been no immediate confirmation of the driver's identity or motive.More news: Uber, Lyft Ban Right-Wing Activist