Passed from fruit bats (flying foxes) to horses and highly fatal to humans, a second case of Hendra was confirmed on a New South Wales farm where one animal has already died and nine people were exposed to the virus.
"Results of laboratory tests yesterday revealed the surviving horse -- which was showing signs of illness for more than 24 hours -- was carrying the Hendra virus," said chief NSW veterinarian Ian Roth, on Thursday.
"It is believed that the horse became infected with Hendra following very close contact with the original infected horse."
At least 48 people have been exposed to Hendra in the past month in an outbreak which has spread from Cairns to within 500 kilometres (300 miles) of Sydney, worrying the city's thoroughbred race trainers.
No humans have yet been infected.
Hendra has killed four of the seven people who have contracted it since it was first identified 1994, but human infections are rare.
Named after the Brisbane suburb in which it was discovered, Hendra is thought to be unique to Australia and is spread from infected bats via half-chewed fruit or water and food contaminated by their urine and droppings.