The plane, a twin engine Beechcraft Queen Air from the 60s, had just taken off from the San Carlos Airport when apparently there was some sort of mechanical problem.
Witnesses say the plane began spiraling to the right, then headed straight down.
It was a frightening experience for people who work in nearby buildings. Mark LaRosa was on the top floor of a building when the plane roared by.
"No sooner do we look out the window but this plane nose down, just heading into the water, he just hit it dead on? The force from the crash, we felt in the building, we thought for sure he had hit the building, so he hit really hard," LaRosa said.
The plane missed the building by just 20 feet.
"I ran inside briefly because I wasn't sure if it would hit the water or on the land here; when I came back out there was debris floating in the water and the plane was slowly sinking," witness Seth Reid said.
Immediately after the crash, witnesses headed into the lagoon in their own boats to search for survivors. The Redwood City Fire Department arrived with rescue swimmers soon after.
"We sent two swimmers into the water to go search the plane and see if there were any victims inside," Redwood City Fire Capt. Dave Pucci said. "One victim was actually pulled from the area immediately next to the plane and pulled to shore; approximately a 40-year-old woman who was deceased."
The deceased woman may be the girlfriend of the co-pilot. Authorities still have not confirmed who was on the plane, but it was owned by 92-year-old Robert Borrmann, a decorated World War II pilot.
"I don't know who was flying the airplane but the owner was Bob Borrmann, he owned Borrmann Steel, he was a B-17 pilot during the war, he was quite competent," Borrmann's friend David Morris said.
It took divers hours to locate the other two bodies inside the wreckage in the murky water.
The two bodies still inside the wreckage may remain there until the plane can be removed from the lagoon. It is up to the National Transportation Safety Board investigators to determine when that will happen.
The investigators are on their way from Seattle to begin their investigation.
The plane was en route to San Martin for its annual inspection. It was once owned by the king of Denmark.
Last week, 48,000 gallons of raw sewage spilled into the same lagoon when a pipe burst. The contamination from that combined with the plane wreckage has led authorities to close the lagoon. None of the contaminents are flowing into the bay.