One of the two soldiers is in critical condition in the hospital in Saint-Jean sur Richelieu, some 40 kilometres south-east of Montreal, while the other was more lightly injured.
The incident occurred shortly before noon yesterday, when a car smashed into the two soldiers before fleeing with police in pursuit.
A few kilometres away, the driver lost control of his car and flipped into a ditch in the side of the road.
A witness said the driver was holding a knife and headed toward police after he extricated himself from his vehicle.
A police spokesman did not confirm whether the man was armed but said officers had opened fire on the 25-year-old suspect, who they did not name but was "known to police."
"I can confirm that shots were fired," spokesman Guy Lapointe told a press conference.
The incident drew political attention when conservative lawmaker Randy Hoback referred to "unconfirmed reports of a possible terror attack" in a question to Prime Minister Stephen Harper.
"We are aware of these reports, and they are obviously extremely troubling," Harper replied.
Investigators said they have not ruled anything out.
"The investigation has only just begun," Lapointe said, adding "we are not going to speculate."
"The terrorist theory is being considered by investigators" alongside all other possibilities, another police official said.
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