H5 and H7 subtypes of low pathogenicity avian influenza viruses (LPAIVs) have the potential to evolve into highly pathogenic avian influenza viruses (HPAIVs), causing high mortality in galliforme poultry with substantial economic losses for the poultry industry. This study provides direct evidence of H7N7 LPAIV mutation to HPAIV on a single poultry premises during an outbreak that occurred in June 2008 in free range laying hens in Oxfordshire, UK. We report the first detection of a rare di-basic cleavage site (CS) motif (PEIPKKRGLF), unique to galliformes, that has previously been associated with a LPAIV phenotype. Three distinct HPAIV CS sequences (PEIPKRKKRGLF, PEIPKKKKRGLF and PEIPKKKKKKRGLF) were identified in the infected sheds suggesting molecular evolution at the outbreak premises. Further evidence for H7N7 LPAIV preceding mutation to HPAIV was derived by examining clinical signs, epidemiological descriptions and analysing laboratory results on the timing and proportions of seroconversion and virus shedding at each infected shed on the premises. In addition to describing how the outbreak was diagnosed and managed via statutory laboratory testing, phylogenetic analysis revealed reassortant events during 2006-2008 that suggested likely incursion of a wild bird origin LPAIV precursor to the H7N7 HPAIV outbreak. Identifying a precursor LPAIV is important for understanding the molecular changes and mechanisms involved in the emergence of HPAIV. This information can lead to understanding how and why only some H7 LPAIVs appear to readily mutate to HPAIV.