Nearly all of the index's main groups suffered heavy losses, with the materials and financial groups suffering some of the biggest falls, down 2.54 percent and 1.38 percent, respectively. Most other groups fell more than 1 percent.
Fertilizer producer Potash Corp took the biggest hit, falling 5.34 percent. Manulife Financial dropped 4.07 percent to C$18.14, while diversified miner Teck Resources declined for a fifth straight session, tumbling 4.16 percent to C$52.07.
World stock markets fell as Libyan leader Muammar Gaddafi signaled defiance of a revolt against his 41-year rule. He appeared on state television and denied he had fled the country. The turmoil fueled a flight from risky assets.
"There's a whole lot of uncertainty. If there's one thing that unnerves markets it's not knowing what the news is," Peter Chandler, senior vice-president and director at Canaccord Wealth Management.
The Toronto Stock Exchange's S&P/TSX composite index closed down 159.43 points, or 1.13 percent, at 13,963.68.
The index fell after a stellar run that saw it surge above the 14,000 mark for the first time since July 2008.
"As far as the general theme is concerned, the unrest in the Middle East is spreading and markets worldwide are pretty nervous," said Levente Mady, market strategist at Union Securities in Vancouver.
Other companies that suffered a significant retreat included Research In Motion, which was down 3.35 percent at C$66.61, Kinross Gold, which slid 5.54 percent to C$15.35, and First Quantum Minerals, which tumbled 7.15 percent to C$117.72.
Oil and gas companies, along with a small handful of gold miners, bucked the negative trend. The index's energy group was up 0.92 percent. Imperial Oil jumped 3.91 percent to close at C$50.00, while Suncor Energy gained 1.76 percent to end at C$45.06.
Oil prices held near 2-1/2 year highs due to worry about oil supply resulting from the Libyan crisis.
"It's a mixed bag with the energy companies. Anybody who is a predominantly domestic producer, has been a big net beneficiary," Chandler said. "Anyone who's had significant exposure to overseas operations -- not so clear cut."
Nexen Inc helped limit the energy group's gains with its 2.18 percent retreat to C$24.64. Talisman Energy fell 1.11 percent to C$23.97.
Chandler said that fears of high energy prices often dampen economic sentiment, noting Tuesday's pullback after the market's recent rally.
"Having a pause to digest that move is not unusual, uncertain or unwelcome," he said. "It's probably not a bad thing that it's happening right now.
"We'll probably see some more profit-taking...some additional modest weakness in the market until we get some more clarity.