Scientists have said a woman who died of bird flu probably contracted the disease from her daughter.
The researchers from the Thai Ministry of Public Health warn it is likely there will be more cases where the virus is passed from human to human.
Professor John Oxford, a leading UK expert, said the virus had broken down the "final door" which prevented it being spread between people.
The study is published in the New England Journal of Medicine.
In 2004, avian flu infected at least 44 people in eight south Asian countries, killing 32.
Until the late 1990s, it had not been thought that the virus strain - H5N1 - could spread to humans.
Once it did, scientists began to fear it could then be spread between people.
In a "worst-case scenario", they suggested the virus could combine with a human flu virus if people were simultaneously infected with both.
If the viruses then exchanged genes, a new, highly infective virus could be created and be passed from person to person.
It is not thought that this happened in the Thai case, but experts say the fact that the evidence strongly suggests human-to-human transmission of the basic virus is worrying.
The case began with an 11-year-old girl who lived with her aunt and went to the doctors with a fever, cough and sore throat in September last year.
Chickens in the household had all died from avian flu in the preceding weeks. The girl slept and played in the area under the elevated house where the chickens were also present.
The girl's mother lived in Bangkok, but went to visit her daughter when she heard she was sick, and cared for her in hospital for two days before the child died.
Three days later, she too began to experience fever and severe shortness of breath. About a week later, she also died.
The child's aunt, who also nursed her, showed symptoms of the virus, and was hospitalised. However, she survived her illness.
The research team interviewed surviving members of the family and carried out laboratory tests on the aunt and the body of the mother to test for the presence of the virus.
The child's body had been cremated so could not be tested.
'Shiver down the spine'
Writing in NEJM, the team, led by Dr Kumnuan Ungchusak, said: "We believe that the most likely explanation for the family clustering of these three cases of avian influenza is that the virus was transmitted directly from the infected patient to her mother and to her aunt.
"Person-to-person spread of avian influenza A (H5N1) strains has been the focus of intense concern.
"If H5N1 remains endemic for months to years in the eight countries that contain more than 30% of the world's population, it is likely that such clusters will appear again."
However, they add, "it is reassuring that no further transmission of the virus has been detected" after the Thai case.
The researchers said human-to-human transmission of avian flu had probably occurred before, but that this case was unique because secondary infection - of the mother - had resulted in her death.
Professor John Oxford, a virologist at Queen Mary's School of Medicine in London, said: "This is a very important step towards the conclusion that we all wanted to avoid - the spread of this virus from human to human.
"It sends a cold shiver down the spine.
He added: "In this case, it didn't spread, but I think we have to be careful not to be over-optimistic."