Several shots have been fired at the National War Memorial in Ottawa, just steps from the nation's parliament.
Witnesses reported seeing a man running toward the government buildings, where more shots were fired inside, according to witnesses.
A soldier has been wounded in the attack, Canadian media report.
The incident came hours after Canada raised its terror threat level from low to medium. A soldier was killed in a hit-and-run earlier in the week.
"Shots fired at War Memorial at 9:52am today; one person injured," Ottawa Police tweeted on Wednesday as a witness reported seeing authorities search from room to room for the suspect.
Additional shots were fired inside the parliament buildings, multiple news agencies and eyewitnesses reported.
Prime Minister Stephen Harper "is safe and has left Parliament Hill", his director of communications wrote on Twitter.
A government official earlier said the raised threat level was in response to an increase in online "general chatter" from radical groups including Islamic State and al-Qaeda.
Ministry spokesman Jean-Christophe de Le Rue said on Tuesday that the increased level "means that intelligence has indicated that an individual or group within Canada or abroad has the intent and capability to commit an act of terrorism".
On Tuesday a Muslim convert was killed by Quebec police after deliberately hitting two soldiers in his car, killing one and injuring another.
A minister said it was a "terrible act of violence against our country".