The development of highly pathogenic avian H5N1 influenza viruses in poultry in Eurasia accompanied with the increase in human infection in 2006 suggests that the virus has not been effectively contained and that the pandemic threat persists. Updated virological and epidemiological findings from our market surveillance in southern China demonstrate that H5N1 influenza viruses continued to be panzootic in different types of poultry. Genetic and antigenic analyses revealed the emergence and predominance of a previously uncharacterized H5N1 virus sublineage (Fujian-like) in poultry since late 2005. Viruses from this sublineage gradually replaced those multiple regional distinct sublineages and caused recent human infection in China. These viruses have already transmitted to Hong Kong, Laos, Malaysia, and Thailand, resulting in a new transmission and outbreak wave in Southeast Asia. Serological studies suggest that H5N1 seroconversion in market poultry is low and that vaccination may have facilitated the selection of the Fujian-like sublineage. The predominance of this virus over a large geographical region within a short period directly challenges current disease control measures.