The alert level was raised from low to medium after authorities said a man they believed to be "radicalized" struck two officers with his car Monday, but authorities said the heightened alert was not "the result of a specific threat."
"This level means that intelligence has indicated that an individual or group within Canada or abroad has the intent and capability to commit an act of terrorism," Jean-Christophe de Le Rue, a spokesman for the Public Safety Ministry said.
The assailant in Monday's attack was identified as 25-year-old Martin Couture-Rouleau, who was briefly detained at a Canadian airport last July when he sought to fly to Turkey, federal police said.
Police did not have enough evidence to charge him with seeking to join a terrorist group abroad and released him.
Couture-Rouleau was fatally shot by police after he struck two soldiers with his car in a Quebec parking lot - a scenario which had been depicted only last month in IS propaganda.
At a press conference, Public Safety Minister Steven Blaney said the deliberate attack was "clearly linked to terrorist ideology."
The attack took place as Canadian warplanes headed to bomb ISIS militants in Iraq.
Defense Minister Rob Nicholson said the soldier's death "in a senseless act such as this only strengthens our resolve" to take on militant groups such as IS.
Motive investigated
Couture-Rouleau smashed his car into the two soldiers in a supermarket parking lot before fleeing with police in pursuit.He called 911 to tell emergency workers about the attack as it was happening.
Police said he then crashed his car into a roadside ditch and rolled it over. When he extricated himself from the wreckage brandishing a knife, officers shot him.
Officials said the injuries to the other soldier were not life-threatening.The motive behind the attack is still being investigated.
Quebec police said Couture-Rouleau may have stalked his victims, waiting for them in his car in the parking lot for more than two hours.
They said the "terrorist thesis (was) being considered by investigators," but did not specify any links between the suspected attacker and any outlawed groups.
Federal police, meanwhile, said the suspect "was known" to the state's anti-terrorism task force.
Royal Canadian Mounted Police Commissioner Bob Paulson said he had been identified as someone who "might commit a criminal act for terrorist purposes."
RCMP spokeswoman Martine Fontaine said his family had become concerned by recent changes in his behavior, and reached out to authorities for help.
"Certain things from his Facebook page indicated that he was radicalized and that he wanted to leave the country to fight on behalf of an ideology," Fontaine told reporters.
He was monitored alongside 90 other Canadians determined to be possible threats to national security, said Fontaine.
Run him over
Last month, IS spokesman Abu Mohammed al-Adnani called for supporters living in coalition member countries, including Canada, to launch spontaneous attacks against their non-Muslim countrymen.
The Canada case carries an echo of the murder of British soldier Lee Rigby in London in May 2013. Rigby was run over by two extremists before being stabbed and hacked to death.
The ISIS group gained international attention in August, when its fighters and allied militant groups swept through the Iraqi city of Mosul and overran territory north and west of Baghdad, even though ISIS did many crimes in Syria before but international community because of enmity with Bashar al-Assad Syrian president didn’t any action against terrorist group.
Western governments fear that the group could eventually strike overseas, but their biggest worry for now is its gains in Iraq and Syria and the likely eventual return home of foreign fighters.
The latter concern led Ottawa to provide its intelligence agency with new powers to track Canadian citizens with suspected terror links when they travel abroad, in soon-to-be updated legislation.
The government said it was aware of more than 130 Canadians overseas who are "suspected of terrorism-related activities."