The pilot escaped with minor injuries and is now being treated in hospital after leaping from the blazing F-16 aircraft, which was about to take off from an airbase in the capital Jakarta.
"As the aircraft was about to take off, there was a fire in the engine, and the pilot straight away decided to abort the flight," air force chief of staff Agus Supriatna said on news channel MetroTV.
"The pilot was rushed to hospital but he is conscious," he added.
Military spokesman Fuad Basya said the airman suffered a minor injury as he jumped from the cockpit.
He said an investigation into the incident had been launched.
The fighter jet was due to take off alongside three other aircraft, which all took off successfully. The aircraft were making preparations to provide security at a summit of Asian and African leaders in Indonesia next week.
The F-16 was one of several aircraft that the United States recently provided to the Indonesian military in the form of a grant, the air force said.
The accident came a month after two air force planes from an Indonesian aerobatics team crashed during a practice session ahead of an air show on Malaysia's Langkawi island. All four pilots ejected successfully and survived.