EMS said they were called to the 100 block of Seventh Avenue S.W. at around 11 a.m. MT, where a man was taken from a lot behind the Palomino Smokehouse to hospital in serious condition.
Sherry Walford, a witness at the scene, said she was taking photographs downtown when she saw a man approach the rally near city hall.
"All of a sudden, I see a crowd gather and this guy walks by and he starts yelling out 'white power' and then starts swearing at these guys and fingering them," she said.
Jason Devine, an organizer of Anti-Racist Action Calgary's 8th annual rally, said that a police van pulled up.
Police said in a news release that officers followed the man, but he fled.
They say the officers caught up to him but there was a physical struggle when one officer approached him.
They say the man produced a metal pipe, and that within seconds, a police firearm was discharged.
An officer also suffered injuries and was treated at the scene.
'Very agitated, very angry'
Devine said he had been standing with a group before the event when the "very agitated, very angry" man approached them.
The group instinctively laughed, but the man "looked like he wanted to do something," according to Devine.
Devine said police later returned to the rally to take statements from the crowd.
"I'm happy we just laughed at him, but who knows what he could have done had police not been there," he said.
This is the second officer-involved shooting in Calgary in less than a week. On Monday, Anthony Heffernan, 27, was killed after an altercation with police in a northeast Calgary motel room.
The Alberta Serious Incident Response Team, which investigates incidents involving serious injury or death that may be attributed by the actions of a police officer, has been called in.