Blood samples from dead chickens from the Himalayan foothills of West Bengal state tested positive for the H5N1 strain, the state's animal resources development minister Anisur Rahaman said.
A mass cull of some 20,000 chickens would begin soon, he added.
West Bengal borders Bangladesh, where the virus has been detected in poultry in more than half of the country's 64 districts.
The disease was first detected in Bangladesh in February 2007 near the capital Dhaka. It was almost dormant by late 2007 but made a forceful comeback in January this year.
West Bengal reported the first outbreak of the virus in January, when health workers culled 3.8 million chickens.
The state reported two more outbreaks in March, leading to the culling of tens of thousands of chickens.
So far, no human cases have been reported in India.
Humans typically catch bird flu by coming into direct contact with infected poultry, but experts fear the H5N1 strain may mutate into a form easily transmissible between people and lead to a pandemic.
A pandemic could affect up to one-fifth of the global population and according to the World Bank, cost up to two trillion dollars.