Police say they arrested a 47-year-old former employee suspected in the shootings at Western Forest Products sawmill in Nanaimo.
A Royal Canadian Mounted Police (RCMP) spokesman said it appeared the shooting began in the car park and continued into the mill's office.
One injured victim was airlifted to hospital in a critical condition.
Another injured victim was in a stable condition.
Western Forest's chief executive confirmed the alleged gunman was previously employed by the firm, located on Vancouver Island.
"We're a local [British Columbia] company and it's very tragic," said Don Demens.
RCMP spokesman Superintendent Mark Fisher told reporters officers responded to calls of a shooting at around 07:00 local time (14:00 GMT) on Wednesday.
They arrived at the mill within minutes and arrested the suspect "without incident", said Mr Fisher.
The police would not give additional details about the victims or suspect other than all five were male. Both deceased victims were pronounced dead at hospital.
"We are only five hours into this investigation," he said. "This type of extreme violence is very rare."
At the mill, crying family members had gathered outside the facility. One worker told the Associated Press news agency the mill's employees had been sent home for the day.
Two people have died and two are injured after a gunman opened fire at a lumber mill in British Columbia.