A recent Hendra virus outbreak at a veterinary clinic in Brisbane, Queensland, Australia, involved 5 equine and 2 human infections. In contrast to previous outbreaks, infected horses had predominantly encephalitic, rather than respiratory, signs. After an incubation period of 9-16 days, influenza-like illnesses developed in the 2 persons before progressing to encephalitis; 1 died. Both patients were given ribavirin. Basal serum and cerebrospinal fluid levels were 10-13 mg/L after intravenous administration and 6 mg/L after oral administration (isolate 90% inhibitory concentration 64 mg/L). Both patients were exposed to infected horses, 1 during the late incubation period in a horse. The attack rate for veterinary clinic staff exposed to infected horses was 10%. An isolate from this outbreak showed genetic heterogeneity with isolates from a concurrent, but geographically remote, outbreak and from previous outbreaks. Emergence of Hendra virus is a serious medical, veterinary, and public health challenge.