Agriculture Minister Evangelos Basiakos said on Monday the H5 virus had been detected in one of nine turkeys tested on Oinouses.
Preliminary tests have identified bird flu and narrowed down the virus to the H5 type, but more rigorous testing is being conducted to determine whether it is the deadly H5N1 strain that scientists are tracking for fear it could mutate and spawn a lethal human flu pandemic capable of killing millions.
If confirmed as the Asian H5N1 strain, it would be the first time it has been detected within the European Union.
According to Basiakos, the owner of a small turkey farm with 20 birds informed the local veterinary service about "the presence of strange symptoms and losses among the turkeys".
A veterinary team from the nearby island of Chios travelled to Oinouses, a 14sq km island with a population of about 700 people, and took samples from the suspect birds.
Tests carried out in Athens found that one of the nine samples tested positive for the H5 virus.
Greece wants more regional
coordination on the virus
The ministry ordered that new samples be taken and sent to a central veterinary testing centre in the northern port of Thessaloniki as there was a pressing need for verification of the analysis.
The ministry placed the farm under quarantine, banning the movement of all people, vehicles, animals, meat, eggs and carcasses from it without ministry permission. It also ordered an immediate disinfection of the farm.
Health services in Greece and elsewhere in Europe had already been on alert after the H5N1 strain of bird flu was confirmed in Romania and Turkey.
Last week, Greece invited health ministers from Balkan and Black Sea countries to coordinate actions on dealing bird flu - but a date for the meeting has not been set.
Greek veterinary authorities have increased inspections of migratory birds at six wetland areas around the country, with daily samples to be sent to two state laboratories.