Police spokeswoman Luba Samri described the assault as a "terror attack."
The attacker plowed onto the curb next to the police station in east Jerusalem, running over five people, including four officers, Samri said. The guards fired at the vehicle from the entrance to the station, she added.
The motorist then got out of the car, apparently holding a knife, and the guards shot and seriously wounded him, she said. The injured and the motorist were taken to hospital.
"The swift and determined response stopped the attack as it was beginning and prevented more innocents from being injured," said Moshe Edri, regional police commander.
The attack mirrored a spate of similar assaults on Israelis late last year amid heightened tensions over the most sensitive holy site in Jerusalem, revered by Muslims as Noble Sanctuary and by Jews as the Temple Mount.
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