The positive sample was re-tested last night and returned a negative reading, reinforcing the belief that the earlier result was a false positive.
The horse is being held at Eastern Creek Animal Quarantine Station - the same centre that EI escaped from last year.
Two swabs from each of the 73 other horses at Eastern Creek were taken early today for further testing. They have been sent to two separate laboratories for final confirmation.
All previous tests from the 73 other horses have been negative and no horses are showing any signs of equine influenza.
No horses will be leaving the quarantine station until final results confirm they are free of the disease.
Federal Agriculture Minister Tony Burke said any potential threat to Australia's quarantine and biosecurity system was of the highest priority.
"Quarantine arrangements for imported horses have been strengthened since the outbreak of equine influenza in 2007, including 24-hour security guards at Eastern Creek and a requirement for close monitoring and strict enforcement of quarantine procedures," he said.
"The devastation of last year's horse flu outbreak is still fresh in people's minds and the Government is taking this issue very seriously."
High-level response procedures have been activated, including informing chief veterinary officers around Australia.
Other quarantine arrangements which have been strengthened since the 2007 horse flu outbreak include the new requirement for imported horses to provide two tests in pre-export quarantine (in their country of origin) and three tests in post-arrival quarantine in Australia.
Horses are also required to undergo a strict vaccination programme for equine influenza in their country of origin.
The government received the Callinan Report into the equine influenza outbreak in April this year and accepted all 38 recommendations to strengthen quarantine measures for imported horses.
The flu scare unfolded on the same day that horse industry leaders gathered in Sydney to discuss options for the management of any future incursions.