"We work hard to make sure all employees feel like valued members of the Air Canada family while ensuring our customers are comfortable and respected when they choose to travel with us."
The change in language will be adopted by gate agents, flight attendants and pilots.
Many have praised the airline's decision as a big win for diversity and inclusion, but online most of the responses have been negative.
In June this year, airlines in the United States began offering passengers additional options besides "male" and "female" when they bought tickets.
The shift followed a handful of US states allowing citizens to identify by non-binary genders and as some countries in the European Union let citizens self-identify by their gender preference.
From June 1, members of Airlines for America, a trade group that represents most leading US carriers, allowed consumers to pick "unspecified" and "undisclosed" in addition to the traditional two options.
"US airlines value a culture of diversity and inclusion, both in the workplace and for our passengers, and we work hard each day to accommodate the needs of all travellers while delivering a safe, secure and enjoyable flight experience," the group said.