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If you are not a Canadian citizen, once you have entered the country, you are generally not required to have a passport to drive. Crossing the Canadian border, a valid passport is required, but within the country, you can rent a car or other vehicle and drive from Vancouver to Quebec and Ontario, and on to Newfoundland, St. John's, and Labrador, without your passport.
If you are a US citizen and crossing at a land border in a private vehicle or on foot, you can enter Canada with your driver's license and a verbal declaration of citizenship. However, to go back to your home country, you require a WHTI (Western Hemisphere Travel Initiative) compliant document. This is the requirement of the US government, not the Canadian government.
According to the US State Department and Kayak, you need a valid passport, a Nexus card, or a passport card to drive to Canada from the US.
A person who is not a Canadian citizen needs to have a valid passport by his/her side to enter the nation. If anyone who is already in Canada is driving in the country, they do not require a passport. So, in simple words, while entering the country, a foreign citizen needs to have a valid passport by their side.
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Yes, you do need a passport if you are not a US citizen to enter Canada. But once you enter there, while traveling inside the country, you are generally not required to carry your passport. The passport is required to enter and exit Canada, not while traveling within the nation.