The three-time world champion from Toronto finished with a score of 97.52 points.
It was a strong skate from Chan, but not enough to beat Japan's Yuzuru Hanyu and his world-record score of 101.45.
Kevin Reynolds of Coquitlam, B.C., finished 17th.
Liam Firus of North Vancouver, B.C., was 28th and didn't move on to Friday's free skate.
In a shocking development, Russia's Evgeni Plushenko withdrew for medical reasons and later announced his retirement.
Chan is gunning for Canada's first Olympic gold medal in men's singles.
Canada has four silver and four bronze in the event, and the last time a Canadian climbed the podium was in 2006 in Turin where Jeffrey Buttle claimed bronze.
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