A protection zone has been set up in Suffolk after government vets confirmed bluetongue disease was circulating in the UK and was classed as an outbreak.
Bluetongue is spread to livestock by biting midges
Deputy chief vet Fred Landeg said test results had shown the disease, which is transmitted by biting midges, was passing between livestock.
So far there have been five confirmed cases of the disease. All the animals which tested positive have been culled.
The zone will be a minimum of 150km (93 miles) around infected premises.
A stricter 20km control zone has also been set up around the known bluetongue cases, with restrictions preventing animals being moved out of both zones.
Mr Landeg told a news conference that laboratory results and the number of cases of bluetongue in Suffolk indicated the disease was circulating in the animal and the midge populations in the county.
He said it had probably entered the country through midges from northern Europe.
There have been nearly 3,000 cases of bluetongue in the region - including the Netherlands, Belgium, France and Germany - since July, which had fuelled fears of its arrival in the UK.
Mr Landeg said: "We had a meeting of our bluetongue expert group, and taking that advice and given the recent experience in northern Europe, I can now confirm we do have bluetongue virus circulating in this country."
He said the aim now was to "contain the disease to that part of the country where we have these confirmed cases", but he warned that bluetongue was a very different disease to control to foot-and-mouth.
Mr Landeg ruled out a cull because the disease could not be passed from animal to animal and it would not help stamp it out.
A cold winter could help eradicate the virus, he said, but he warned that it was likely there would be a "large" number of cases before then, and that it could return afterwards.
"Unless we do have that very severe winter it is likely, given the northern European experience, that the disease will re-emerge next year."
There was currently no available vaccine for this strain of the virus, but it did not "pose any risk to human health", he said.
Farmers within the 20km control zones placed around infected premises will not be permitted to transport livestock out of the area, unless for slaughter within the wider protection zone.
Livestock owners within the protection zone will be allowed to move animals only within its boundaries.
National Farmers' Union president Peter Kendall said news of an outbreak had been expected, but was still a "bitter blow" to farmers in the affected areas.
"Bluetongue is a nasty disease, which represents a very real threat to the welfare of farm animals, as well as to the economics of livestock farming, so we have to do what we can, and what we are required to do by EU law, to seek to contain it."
The best hope for eradicating the disease was the development of a vaccine, he said.
"We understand that this may become available next year and we will be pressing both the EU and the international animal health authorities to lift all bluetongue-related restrictions once a programme of vaccination has been successfully implemented."
Ben Woolf, a cattle farmer from the affected area in Suffolk, told BBC News 24 he expected the economic effect to be similar to that of foot-and-mouth, but over a longer period.
"At the moment it's really a case of possibly applying some sort of fly repellent to the animals, and then hoping for a vaccine to be developed sooner rather than later," he said.
The Department for Environment, Food and Rural Affairs (Defra) announced the fifth case of bluetongue on Thursday at a farm near Burstall in Suffolk.
Other cases were confirmed at Washbrook near Ipswich, a farm in Lound and in two animals on a rare breeds farm in Baylham, near Ipswich.
The strain, first detected on Saturday, is the same as one that has killed livestock in Europe.
The virus is spread by midges and affects cattle, sheep, goats and deer.
Animals with the disease experience discomfort, with flu-like symptoms, and swelling and haemorrhaging in and around the mouth and nose. They can also go lame and have difficulty eating.