There have been two confirmed cases of the H5N8 virus confirmed in Northern Ireland - both in wild birds.
There have also been six cases of bird flu recorded in the Republic of Ireland.
The agricultural show was completely cancelled in 2001 because of foot and mouth disease.
More than 700 birds had been entered in this year's show.
Rhonda Geary, Royal Ulster Agricultural Society (RUAS) operations director said: "Following consultation with the Department of Agriculture, Environment and Rural Affairs, the RUAS have regrettably decided to cancel the poultry section of the 2017 show.
"There will, however, still be classes for pigeons, decorated eggs and shelled eggs."
The show normally includes classes for turkeys, geese, waterfowl, modern game, old English game and Bantams.
Andrew Kerr runs Clogher Valley Eggs and Poultry and breeds a wide range of birds.
He is disappointed that his birds will not feature at Balmoral this year.
"It's not unexpected, but there's still profound disappointment in the poultry world," he said.
"The Balmoral show is a flagship event in the poultry calendar. It provides an opportunity to showcase the wide variety of poultry and waterfowl that we have to offer within Northern Ireland."
This year's show will run from May 10-13 and will mark the first time that Balmoral will run over four days.
The RUAS said information on refunds for entries already submitted would be made available at a later date.
The Royal Ulster Agricultural Society has cancelled the poultry section of the Balmoral Show because of concerns over bird flu.