The significance of the church fire scene in The Outsiders is that it enables Johnny to achieve redemption after killing the Soc in a gang fight. One night in a prior scene, some of the Socs find Johnny and Ponyboy and attack them. To save Ponyboy from one of the attackers, Johnny pulls out his knife and stabs him to death.
The fire scene helps the characters—both Johnny and Ponyboy, as well as Dally—develop by presenting a situation in which they must make a choice between acting in their own best interests. although it would mean harm to others, or making a sacrifice to help others. All three decide to make the sacrifice. The scene shows Johnny and Ponyboy rescuing children from the fire instead of fleeing from the police to avoid imprisonment for the stabbing. It also shows Dally sacrificing to save the other two.
Before the fire begins, Ponyboy and Johnny hide out in the old church, where they believe the police will not find them. Ponyboy notes how careful they must be with their cigarettes, because “if that old church ever caught fire there'd be no stopping it.”
When Dally takes the boys in his car, from the distance they see that a fire has, indeed, broken out. Both boys jump out of Dally’s car to run to the church. They are told that some school children who were having a picnic when the fire broke out are missing and presumably in the church. Ponyboy runs inside to rescue them, with Johnny following at his heels. Performing this heroic deed emboldens both boys. They feel courageous. This shows significant character development, particularly for Johnny, who is seen as very timid up until this point (except for a brief moment at the movies), the result of the many beatings he endures at his father’s hand and a previous attack by the Socs.
Dally is standing outside the church and screams to them,
For Pete's sake, get outa there! That roofs gonna cave in any minute. Forget those blasted kids!
Neither boy heeds Dally’s words. They put the children ahead of their own safety, and in doing so, they achieve redemption. When Dally then helps save Ponyboy and Johnny, he also achieves redemption. In fact, the ambulance technician says,
I swear, you three are the bravest kids I've seen in a long time. First you and the black haired kid climbing in that window, and then the tough-looking kid going back in to save him. Mrs. O'Briant and I think you were sent straight from heaven.