@#Highly Pathogenic Avian Influenza (HPAI) is a highly contagious disease in poultry. The outbreaks can lead to flock mortality up to 100% in two to three days. In July 2018, high mortality in a commercial layer farm in Kauluan village, Sabah was reported. Samples were sent to Veterinary Research Institute Ipoh for diagnosis. Virus isolation and molecular detection is carried out simultaneously. The causative agent was then identified as AI H5N1 virus by real time reverse transcription-polymerase chain reaction (RT-PCR). The virus was then subjected for further nucleotide sequencing of full length hemagglutinin (HA) and neuraminidase (NA) gene. The PQRERRRKR/GLF motif at the HA cleavage site indicated that the isolate was of HPAI virus. Phylogenetic analysis of the HA gene showed that the isolate was belonged to the clade 2.3.2.1c virus. In the HA gene, besides the S133A substitution, the virus possesses conserved amino acid at most of the avian receptor binding sites including the glutamine (Q) and glycine (G) at position 222 and 224 respectively, indicating that the virus retains the avian-type receptor binding preference. As such, the zoonotic potential of the virus was relatively low. On the other hand, though the N154D and T156A substitution were detected in the same gene, the pandemic potential of this Sabah 2.3.2.1c virus is low in the absence of the Q222L, G224S, H103Y, N220K and T315I. A typical 20 amino acid deletion with loss of four corresponding glycosylation sites in the NA stalk region was visible. Though three NA resistance markers were detected, the virus was predicted to be sensitive to NA inhibitor. This is the first HPAI H5N1 outbreak in Sabah. The introduction of this virus into East Malaysia for the first time raised an alert alarm of the future epidemic potential. Strict farm biosecurity, continuous surveillance programme in poultry, wild birds, migratory birds; molecular epidemiology as well as risk assessment for the virus with pandemic potential are needed in dealing with emergence of new influenza virus in the country.