Police arrested a suspect at the scene and found he was also carrying a dummy grenade and a knife.
The alert occurred during a live TV broadcast on the resort’s waterfront. French station Canal+ was interviewing the two actors when a man fired twice into the air.
“The bodyguards jumped over the barriers into the crowd and pulled him to the ground,” said witness Arthur Laiguesse.
“The police arrived and told everyone to run because there was a grenade in his hand.”
Television footage showed Waltz, other guests and crew scrambling from the seaside stage as a voice said “there’s someone shooting”.
After the man was taken away, the show’s producers told the crowd the programme would continue.
“It really appears to be a crazy guy,” said a police source.
Austrian actor Waltz has won two Best Supporting Actor Oscars for Django Unchained and Inglourious Basterds.
He is part of the Cannes prize jury, along with Auteuil and the likes of Steven Spielberg and Nicole Kidman.
The gun scare follows the theft of jewellery worth more than $1m (£660,000) from a hotel in the glitzy French resort.
This year’s festival opened with a red-carpet screening of Baz Luhrman’s new film The Great Gatsby, starring Leonardo DiCaprio and Carey Mulligan.
Other films that will compete for the Palme D’Or trophy this year include Inside Llewyn Davis, directed by the Coen brothers, and Venus in Fur, directed by Roman Polanski.