The female border officer's condition is not known, but Const. Bert Paquet said at an RCMP news conference that she was breathing and conscious when airlifted to hospital.
Paquet told reporters that a man travelling alone in a white van with Washington licence plates pulled up to a kiosk and shot the border guard.
He said the suspect died from "what appeared to be a self-inflicted gunshot wound."
Video surveillance is being reviewed and witnesses are being interviewed, Paquet said.
LeAnn Dombrosky told CBC News she was at the border crossing when the shooting occurred.
"I was the third car in the Nexus lane as this incident occurred at 1:51 p.m.," Dombrosky said in an email.
"There was a gunshot and sounds of a woman screaming which drew the attention of all the other guards. Then after about 10 seconds, the guards were yelling to a man in a white van in the far left lane (closest to the building) to put his hands up —another shot or two were fired — in which the driver of the white van took his life with a bullet in his head."
Statements from safety minister, CBSA
Luc Portelance, President of the CBSA, issued a statement saying he had spoken with the regional director general in Vancouver "to express my support and to let her know my thoughts are with the offier and her family during this difficult time."
"This is a profound reminder of the risks that border services officers assume every day. I know that the courage and dedication of our officers are second to none."
Public Safety Minister Vic Toews also issued a statement saying his thoughts and prayers go out to the officer's family and colleagues.
"I am deeply concerned by the news of the shooting today at the Peace Arch border crossing of a CBSA officer," Toews said. "This event is a sobering reminder of the dangerous conditions faced daily by the men and women of our law enforcement agencies."
Traffic in both directions was halted after the incident occurred and would not be moving "for several hours," Paquet said.
The Peace Arch, officially called the Douglas crossing, about 40 kilometres south of Vancouver, is the third-busiest border point between Canada and the U.S.
An average of 3,500 cars pass through the crossing on a slow day, and during peak periods about 4,800 vehicles will move through the border.
During those peak periods, border delays can reach four hours on either side of the border.