The flu was identified in three horses from trainer Donald McCain's yard, who had all had their compulsory flu jabs.
The British Horseracing Authority (BHA) confirmed the affected stable had runners at Ayr and Ludlow on Wednesday, where they were in close proximity to dozens of other horses from many racing stables.
"The BHA is working closely with the Animal Health Trust", its statement said, "in order to manage the logistical challenge of providing sufficient swabs and handling the volume of tests being sent through the facility, considering that testing of a total of 174 yards is now taking place".
In an update today the BHA said it was still "in the early stages of assessing the scale and severity of the outbreak" and said it would receive the results from further tests this evening.
"The Festival isn't for five weeks and we hope that the BHA's early actions will resolve this matter quickly".
Omagh-based Mervyn Torrens, the chairman of the Northern Ireland Trainers' Association, said: "Many locally-based trainers make trips to Britain as a lot of the racing is not as competitive as in Ireland".
Horse racing in Britain has been cancelled until at least Wednesday over an outbreak of equine flu. With McCain-trained horses running in Britain this week that potentially exposed a significant number of horses from yards across Britain and in Ireland.More news: Ireland's Kearney set for 6 Nations return
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Only two events have cancelled the Cheltenham Festival in the past; the 2001 foot-and-mouth crisis, and the second World War.
It is not unlike human flu with symptoms of coughing, nasal discharge and a fever but it's not normally fatal, with horses generally remaining infectious for up to 10 days.
"It added that a plan to reschedule this weekend's key races will be constructed".
The British racing industry is worth £3.45 billion a year and horse racing is the second most attended sport in the country with about 5.7 million people going to meetings each year.
Despite this, racing at Chantilly in France did go ahead under "protection measures" on Thursday, the governing body France Galop issuing a six-point caution to all horse racing personnel.
It is the most potentially damaging of the respiratory viruses that occur in United Kingdom equines and disease symptoms in non-immune animals include high fever, coughing and nasal discharge.