Authorities are urging vigilance by horse owners and veterinarians in what is a high-risk time of the year for infection.
The virus is carried by native fruit bats called flying foxes. Hendra is capable of infecting horses and it is then capable of being passed on to humans. Since 1994, when the virus was first identified in Brisbane, seven people are known to have caught the virus, with four of them dying.
New South Wales Department of Primary Industries veterinarians confirmed yesterday that Hendra caused the death of a horse yesterday near Wollongbar on the state's North Coast.
"The property has been placed in quarantine and the dead horse has been buried," the state's chief veterinary officer, Ian Roth, said.
"The horse was suffering from fever when examined by a private veterinarian on Tuesday this week.
"Following a rapid deterioration in the horse's condition on Wednesday, the veterinarian euthanised the horse at 1am yesterday."
Roth said samples from the dead horse were sent to the department's Elizabeth Macarthur Agricultural Institute for laboratory analysis and results confirmed Hendra.
He said there was no current link to the recent Hendra outbreak at Beaudesert in Queensland, involving the death of one horse and the quarantining of two properties.
"The horse had been in a paddock containing a fig tree, so it is likely that flying foxes were the source of infection," he said.
"Hendra virus can spread from flying foxes to horses and, rarely, from horses to people.
"There is one other horse on the Wollongbar property and it is currently in good health.
"Horse movements on and off the property are being checked by veterinary staff."
Roth said Hendra virus can cause a range of clinical signs in horses.
"Hendra should be considered in horses where there is acute onset of fever and rapid progression to death associated with either respiratory or nervous signs."
The state's health director for the Centre of Health Protection, Dr Jeremy McAnulty, said nine people who had close contact with the infected horse would be closely monitored for any symptoms of the infection.
Public health unit staff have interviewed these people to assess their level of exposure.
An expert panel of public health and infectious diseases physicians from Queensland and New South Wales was convened yesterday afternoon to provide expert advice.
The panel assessed all contacts as having exposure ranging from negligible to medium level to the infected horse.
These people will be closely monitored by public health unit staff. Blood tests were taken where appropriate and will be repeated at three and six weeks.
"All of the human infections that have occurred in the past have been linked to high level exposures to infected horses," McAnulty said.
"There has been no evidence of human-to-human or flying fox-to-human spread of Hendra virus.
"Horses may shed Hendra virus before they show any signs of illness so it is always important to use good hygiene practices when around horses."
The state's health department advises people to always take several important steps to reduce the risk of becoming infected with Hendra virus: