The virus has so far not been spotted in domestic birds, the Department for Environment, Food and Rural Affairs (DEFRA) said, adding that bird owners must isolate their flocks from wild birds in the area.
Chesil Beach and Portland Bill, the southernmost tip of the Isle of Portland, overlooking the English Channel, have been placed in a protection zone.
The department said experts were trying to determine how the virus spread. No culling of wild birds is being planned, but other measures could follow.
This is the latest in a series of bird flu cases in Britain. In November 2007, around 5,000 birds were slaughtered after avian flu was confirmed in turkeys at a poultry farm in Suffolk.
Although no cases of human-to-human transmission of avian influenza have been reported, scientists fear the virus could mutate into a strain that could pass easily from person to person, causing a global pandemic.
A total of 216 deaths out of 348 bird flu human cases have been registered worldwide by the World Health Organization (WHO) since 2003.
