The shootings took place at a campsite hosting festival-goers, a few hundred yards from the Gorge Amphitheatre venue where thousands of people were attending an electronic dance music festival.
The venue is near the small city of George, about 239km east of Seattle.
The shooting took place the day before at least 20 people were shot, one fatally, early on Sunday during a Juneteenth celebration in a car park in Chicago.
The first shooting in Washington was reported at 8.30pm, AP reported, citing the Grant County Sheriff’s Office.
After the initial shots were fired, the gunman moved through the campground and “continued to shoot randomly into the crowd” until he was eventually confronted by police and taken into custody, said Kyle Foreman, public information officer with the sheriff’s office.
The gunman was shot in the confrontation with police and was taken to hospital, he said. No further details were immediately released.
A public alert had advised people that there was a gunman in the area and urged them to “run, hide or fight”, but Mr Foreman said there was no effort to evacuate the festival.
The festival continued following the shooting and did not end until early on Sunday morning, he said.
“He was, again, on the periphery of the property. Law enforcement had eyes on him and they were able to keep him in that area. He wasn't moving towards the venue,” Mr Foreman said.
Yazmin Alvarez, 30, was with her husband and friend at a campsite near the amphitheatre when a woman ran by and told them there was a gunman, she told the Seattle Times.
Her group ran towards the exit, finding cover by buildings near a road, along with another dozen or so people. They saw helicopter lights as the festival carried on nearby.
“It just felt uncomfortable since we are also hearing people having a great time to the left of us,” Ms Alvarez said.
The group went back to the campground to retrieve identification and warmer clothing but left their camping gear behind.
Details on the victims had not yet been released.
Festival organisers said on social media that Sunday’s events at the Gorge were cancelled.
They described the site of the attack as an “overflow camping area” and most people who were staying there were probably at the concert when the shooting occurred, Ms Foreman said.
The independent North Central Washington Special Investigation Unit is investigating the shooting.