C152 instructor reported a near midair collision on downwind.

Attributes
ACN	1572573
Time
Date	201808
Local Time Of Day	1201-1800
Place
Locale Reference	ZZZ.Airport
State Reference	US
Environment
Flight Conditions	VMC
Light	Daylight
Aircraft 1
Make Model Name	Cessna 152
Operating Under FAR Part	Part 91
Flight Phase	Initial Approach
Route In Use	Other Traffic Pattern
Flight Plan	None
Aircraft 2
Make Model Name	Cessna 152
Operating Under FAR Part	Part 91
Flight Phase	Other Pattern
Flight Plan	None
Person 1
Function	Instructor Pilot Not Flying
Qualification	Flight Crew Commercial Flight Crew Flight Instructor Flight Crew Instrument
Experience	Flight Crew Last 90 Days 150 Flight Crew Total 630 Flight Crew Type 500
Events
Anomaly	Conflict NMAC Deviation - Procedural Published Material / Policy
Miss Distance	Horizontal 300 Vertical 0

Narrative:

I was training a student in the pattern at ZZZ in aircraft X. During our 3rd circuit; soon after leveling off and turning left downwind for runway zz at 1;000 feet AGL; an airplane; aircraft Y; suddenly appeared in front of us; from below; no more than 300 feet in front at the same altitude. This airplane I had heard cleared for takeoff after we had completed our most recent touch-and-go. I immediately took control of the airplane from my student; slowed down and notified tower that an airplane was directly ahead of us a few hundred feet away. Tower notified aircraft Y that they had turned crosswind too early and to make a right 360; to which they complied. We completed our circuit with a touch-and-go and departed the pattern to the south. As we were departing; I overheard what I assume was an instructor in aircraft Y notify tower that they'd be exiting the airplane and that a first time solo student would be taking back off.

Original NASA ASRS Text

Title: C152 instructor reported a NMAC on downwind.

Narrative: I was training a student in the pattern at ZZZ in Aircraft X. During our 3rd circuit; soon after leveling off and turning left downwind for runway ZZ at 1;000 feet AGL; an airplane; Aircraft Y; suddenly appeared in front of us; from below; no more than 300 feet in front at the same altitude. This airplane I had heard cleared for takeoff after we had completed our most recent touch-and-go. I immediately took control of the airplane from my student; slowed down and notified tower that an airplane was directly ahead of us a few hundred feet away. Tower notified Aircraft Y that they had turned crosswind too early and to make a right 360; to which they complied. We completed our circuit with a touch-and-go and departed the pattern to the south. As we were departing; I overheard what I assume was an instructor in Aircraft Y notify tower that they'd be exiting the airplane and that a first time solo student would be taking back off.

Data retrieved from NASA's ASRS site and automatically converted to unabbreviated mixed upper/lowercase text. This report is for informational purposes with no guarantee of accuracy. See NASA's ASRS site for official report.