The virus was found in chickens sold at the Cheung Sha Wan wholesale poultry market and all chickens will be destroyed, according to the government. The wholesale market will be closed for 21 days to disinfect it. Local farms will be inspected for the virus and have been asked to stop sending chickens to the market.
The government has banned the import of live chickens from mainland China for three weeks.
Television footage shows health officials in protective suits putting chickens in bins and pumping in CO2 to kill them. The last time Hong Kong had to cull poultry was in December 2011, during the H5N1 scare.
The H7N9 virus made the jump from poultry to humans last year and China has seen around 200 cases, including more than 50 deaths. The first three weeks of January saw a surge in bird flu cases in China, with 73 new cases reported so far. Experts believe the Chinese New Year could up the count, as people travel across the country, many with live poultry.
Most cases of infection have happened due to contact with poultry and, according to the WHO, available data does not support sustained human-to-human transmission.