Sales of chicken had dipped sharply after the first outbreak
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Authorities in the Indian state of Madhya Pradesh have begun slaughtering 7,000 chickens after identifying a case of the deadly H5N1 bird flu strain.
A senior official said one sample of tests on poultry in the state's Ichapur area had tested positive.
Meanwhile in neighbouring Maharashtra state's Jalgaon district a cull of about 250,000 birds is under way.
India's first bird flu outbreak was reported last month but so far there have been no cases among humans.
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Veterinary commissioner of Madhya Pradesh, Rajesh Rajora, told the BBC the slaughter in Ichapur was expected to be finished by Wednesday night.
He said it would be followed by a comprehensive survey of every house in the 23 villages surrounding Ichapur. All houses will be disinfected and all birds vaccinated.
Slaughter
Hundreds of thousands of birds were destroyed in Maharashtra after India's first bird flu outbreak last month.
The state has identified over 10 cases of the deadly H5N1 bird flu strain so far - all in Jalgaon district.
Bird flu has been found in three states
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The virus later spread to some poultry farms in the neighbouring Gujarat state.
A senior animal husbandry department official in Maharashtra, Bijay Kumar, told the BBC the cull would take about five days and involved 400 workers.
He said they would spend the next 10 days sanitising the area in an attempt to prevent any further outbreak.
There have still been no reported cases of the virus in humans in India - 95 samples collected from people with flu-like symptoms last month tested negative for bird flu.
Fears
The detection of bird flu in India last month led to sharp falls in the sale of poultry and poultry products.
India's parliament, military, railways and major airlines temporarily stopped serving chicken and eggs, despite government reassurances that they were safe to eat if cooked properly.
The virus does not at present pose a large-scale threat to humans, as it cannot pass easily from one person to another.
However since 2004 about 100 people have died of the H5N1 strain - most of then in South-East Asia.
Experts fear the virus could mutate to gain this ability, and in its new form trigger a flu pandemic, potentially putting millions of human lives at risk.