Highly pathogenic (HPAI) strains emerge from their low pathogenic (LPAI) precursors and cause severe disease in poultry with enormous economic losses, and zoonotic potential. Understanding the mechanisms involved in HPAI emergence is thus an important goal for risk assessments. In this study ostrich-origin H5N2 and H7N1 LPAI progenitor viruses were serially passaged seventeen times in 14-day old embryonated chicken eggs and Ion Torrent ultra-deep sequencing was used to monitor the incremental changes in the consensus genome sequences. Both virus strains increased in virulence with successive passages, but the H7N1 virus attained a virulent phenotype sooner. Mutations V63M, E228V and D272G in the HA protein, Q357K in the nucleoprotein (NP) and H155P in the neuraminidase protein correlated with the increased pathogenicity of the H5N2 virus; whereas R584H and L589I substitutions in the polymerase B2 protein, A146T and Q220E in HA plus D231N in the matrix 1 protein correlated with increased pathogenicity of the H7N1 virus in embryos. Enzymatic cleavage of HA protein is the critical virulence determinant, and HA cleavage site motifs containing multibasic amino acids were detected at the sub-consensus level. The motifs PQERRR/GLF and PQRERR/GLF were first detected in passages 11 and 15 respectively of the H5N2 virus, and in the H7N1 virus the motifs PELPKGKK/GLF and PELPKRR/GLF were detected as early as passage 7. Most significantly, a 13 nucleotide insert of unknown origin was identified at passage 6 of the H5N2 virus, and at passage 17 a 42 nucleotide insert derived from the influenza NP gene was identified. This is the first report of non-homologous recombination at the HA cleavage site in an H5 subtype virus. This study provides insights into how HPAI viruses emerge from low pathogenic precursors and demonstrated the pathogenic potential of H5N2 and H7N1 strains that have not yet been implicated in HPAI outbreaks.