Live poultry markets (LPMs) are regarded as hubs for avian influenza virus (AIV) transmission in poultry and are a major risk factor in human AIV infections. We performed an AIV surveillance study at a wholesale LPM, where different poultry species were sold in separate stalls, and nine retail LPMs, which received poultry from the wholesale LPM but where different poultry species were sold in one stall, in Guangdong province from 2017 to 2019. A higher AIV isolation rate was observed at the retail LPMs than the wholesale LPM. H9N2 was the dominant AIV subtype and was mainly present in chickens and quails. The genetic diversity of H9N2 viruses was greater at the retail LPMs, where a complex system of two-way transmission between different poultry species had formed. The isolated H9N2 viruses could be classed into four genotypes: G57 and the three novel genotypes, NG164, NG165, and NG166. The H9N2 AIVs isolated from chickens and quails at the wholesale LPM only belonged to the G57 and NG164 genotypes, respectively. However, the G57, NG164, and NG165 genotypes were identified in both chickens and quails at the retail LPMs. We found that the replication and transmission of the NG165 genotype were more adaptive to both poultry and mammalian models than those of its precursor genotype, NG164. Our findings revealed that mixed poultry selling at retail LPMs has increased the genetic diversity of AIVs, which might facilitate the emergence of novel viruses that threaten public health.