A member of the public reported an unknown species of shark off Cobblestones just moments after the attack, and the Surf Life Saving Westpac helicopter reported a four-metre shark just after 10am near the Lefthanders surf spot.
Photographer Peter Jovic, a witness to the incident, told ABC how the surfer had managed to "body surf" back to the beach after being attacked.
'There was a lot more thrashing around.
The man was conscious and breathing when paramedics arrived and has been flown to Royal Perth Hospital.
A surfer was killed by a shark at Gracetown in 2013.
Another radio caller said other surfers had been spooked by the shark and had started leaving the water just before the attack happened.
AAP understands the man has lived in Gracetown for some time, with one friend describing him as "an awesome guy".
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The Surf Life Saving WA Westpac Lifesaver Rescue Helicopter will also conduct aerial patrols.
Lifeguards said a 4-meter (13-foot) shark was spotted off a nearby beach two hours after the attack.
The Margaret River Pro worldwide surfing competition, which is about 15km away from the attack, was suspended for about one hour, but then resumed at Main Break with Kiwi Hareb one of the two surfers who went back in the water first.
An alert has been issued warning beach-goers that the carcass could draw sharks closer to shore.
Surfers had been in action this morning in the competition before the attack.
With all eyes on the nearby contest at Margaret River, WSL officials chose to put the event on hold-and considering Mick Fanning's close call at the J-Bay Open in 2015, it seems like a good call.
He said the incident emphasised the need to do more, including using SMART drumlines, rather than the Labor government's subsidised shark deterrent devices.
There have been three fatal shark attacks in the area since 2004, when Bradley Smith was fatally mauled by a great white.