Gun violence is rare in Malaysia, which has strict firearms laws, and the incident on the northern resort island of Penang late yesterday brought traffic to a standstill for about six hours.
"Three people were killed and four others injured in the shooting. The weapon has been seized," national police chief Khalid Abu Bakar told reporters.
The bodyguard, a former military reservist who police did not want to identify, was detained and is being held in police custody.
The bodyguard, who police said was in his 40s, initially shot his 32-year-old employer Ong Teik Kwong in his car, Mior Faridalathrash Wahid, Penang district police chief, told AFP.
He then got out of the vehicle and began firing at random, killing two more people and wounding four others, including a cameraman with a public broadcaster, until he surrendered to the police.
"Police approached the shooter and ordered him to surrender. He obeyed police instructions and we arrested him," Mior said.