The Scottish Executive said preliminary tests had found “highly pathogenic H5 avian flu” in a sample from the bird.
The H5 strain is a contagious strain and can be fatal to birds.
Further tests are being carried out to see if the strain is the deadly H5N1, which can be fatal to humans if they come into close contact with birds.
The European Commission said the dead swan was found in Cellardyke, a small coastal town in Fife, nine miles from St Andrews.
A 3km ‘protection zone’ has been thrown up round the area, along with a ‘surveillance zone’ of 10km.
Chief veterinary officer for Scotland Charles Milne said: “Whilst disease has yet to be confirmed, this is an important development.
Keepers of birds in the protection zone are being instructed to isolate their poultry from wild birds, by taking them indoors wherever possible.
Measures to restrict the movement of poultry, eggs and poultry products from these zones are also being brought into effect immediately.
Samples from the dead swan were last night being sent for analysis at the EU’s bird flu laboratory in Weybridge, Surrey, to check for the H5N1 strain of the virus, the European Commission confirmed.
If the deadly strain is confirmed, Britain will be the 13th EU country hit by the virus.
Health experts fear the virus could combine or mutate into a form that passes easily between humans, possibly sparking a pandemic, but there is no evidence of such transmission yet.
Professor John Oxford, scientific director of Retroscreen Virology Ltd and Professor of Virology at St Bartholomew’s and the Royal London Hospital, said: “You can imagine the swan as a piece of litmus paper. A dead swan will indicate that some wild bird like a duck has silently infected it so there will be other wild birds around that are H5 positive. It means the virus has arrived.”