The attack occurred shortly before 8:00am local time (0000 GMT) at Cobblestones beach, near where the world's top surfers were competing on the sixth day of the Margaret River Pro event, which is part of the World Surf League Championship Tour.
The wounded victim is a man in his thirties.
The man was conscious and breathing when paramedics arrived and has been flown to Royal Perth Hospital.
"Sharks are still a threat to surfers and people in the ocean here", he told reporters.
Event organisers put the competition on hold but have not said whether the victim was taking part in the competition.
Organisers chose to resume the competition about an hour later with "enhanced safety measures" after discussions with local authorities and surfers.
Surf photographer Peter Jovic told the ABC there were about five people in the water at the time and the attack echoed pro surfer Mick Fanning's lucky escape at South Africa's Jeffreys Bay.
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"We are confident, we wouldn't have resumed if we didn't feel that way", World Surf League (WSL) commissioner Kieren Perrow said.
"A shark popped up and pretty much ended up knocking a surfer from his board", he said.
"Further enhanced safety measures, including ski and drone presence, will be added to the event's mitigation protocols".
He said the incident emphasised the need to do more, including using SMART drumlines, rather than the Labor government's subsidised shark deterrent devices. The safety of our surfers & staff is a top priority.
"There was a lot more thrashing around after that, it was pretty hard to see what was going on".
There have been three fatal shark attacks in the area since 2004, when Bradley Smith was fatally mauled by a great white.
"All the other surfers swam to him, helped him get away from his board and leg rope and helped him get on a wave, and luckily [he] caught a wave onto the reef".
A surfer was killed by a shark at Gracetown in 2013.