"The destruction of birds has begun in the first village to register the mass deaths" of poultry in the peninsula's northeast four days ago, Maria Miroshnichenko, the chief of Crimea's veterinary service said.
Officials expect to destroy some 20,000 poultry in all, she said.
President Viktor Yushchenko ordered that affected areas in Crimea be placed under a state of emergency on Saturday after tests confirmed the H5 virus in domestic poultry.
"In the morning a quarantine was placed around the five villages" where the virus was detected, Serhiy Ivanov, spokesman for the Crimean branch of the emergencies ministry said.
Interior ministry checkpoints had been established on a three-kilometer radius around the villages, disinfecting all vehicles coming out of them, Mr Ivanov said.
Crimea villages
The H5 virus was found among chickens and geese in five villages in Crimea, a peninsula that juts into the Black Sea, after more than 1,600 domesticated birds, including chickens, geese, ducks and turkeys, died in the region.
Samples had been forwarded to laboratories in Britain and Italy to establish if the virus is of the deadly H5N1 strain, which has killed almost 70 people around Asia over the past two years.
Those who have died are thought to have mainly caught the virus from close contact with poultry, but scientists fear the virus could mutate with a human flu strain, allowing it to transfer between people and sparking a pandemic.
In Crimea, special teams were to go from house to house, killing birds and testing people for abnormal symptoms, Pyotr Verbitsky, Ukraine's chief veterinary inspector, told reporters in the city of Simferopol.
Sales of live poultry have been banned throughout the peninsula and all people who had come into contact with poultry will undergo regular medical testing and are expected to receive flu vaccination shots.
Emergencies Minister Viktor Baloga, who is in charge of bird flu-related measures, met residents of one of the affected villages early Saturday.
He urged them to agree to the destruction of their poultry and assured them they would be compensated for any losses, Mr Ivanov said.
Virus different
The domestic poultry were likely to have caught the virus after coming into contact with migratory birds, officials said.
The cases have been detected near the Sivash saltwater lake in Crimea's northeast, a stopover route for millions of migratory birds from Russia's Siberia and Volga regions, as well as Asia.
"The virus is behaving differently than in Russia and Romania," Ukraine's neighbors where bird flu has also been detected, said Dr Verbitsky.
"The sickness passes without any symptoms," he said. "In the evening the birds are healthy and in the morning they are dead."
Although the virulent H5N1 strain has not yet been detected in Ukraine, the country has banned the import of poultry and its derivatives from Croatia, Romania and Turkey.
Imports of live wild and pet birds from several regions of Russia have also been banned from entering Ukraine.