A 27-year-old woman surnamed Zhang died in the east Chinese province of Shandong on Saturday, nearly two weeks after falling ill, the provincial health bureau said.
It was the second confirmed fatality this month from the H5N1 strain of avian influenza, bringing the total number of reported deaths in China since 2003 to 22.
On the same day that Zhang died, state media reported that a two-year-old girl had also been diagnosed with bird flu in the neighbouring province of Shanxi.
The Shanxi provincial health bureau said in a statement on Sunday that she was in a critical condition.
It said that 67 people who had been in close contact with the toddler were under observation, but none had shown signs so far of having contracted the disease.
News of the two deaths this month, after a year passed with no fatalities reported in China, comes at the worst time for Chinese health authorities.
Poultry consumption is rising with just one week to go before the Lunar New Year, while low winter temperatures are creating conditions that are conducive to the spread of the virus.
"With the approach of the Lunar New Year, the trade in poultry products is increasing, and there is a growing risk of the emergence and spread of epidemics," the agriculture ministry warned.
China's Lunar New Year is the occasion for a week-long holiday, with many of the nation's 1.3 billion people travelling for family reunions that are characterised by big meals featuring poultry and other meats.
This month's previous fatality, a 19-year-old woman in Beijing, had been handling ducks she had bought in a market.
The agriculture ministry called for a number of measures to counter the re-emerging threat, including stepped up surveillance and increased production of poultry vaccines.
Highlighting the underlying threat of bird flu, the ministry reported that there had been no outbreaks detected among poultry in Shandong and Shanxi provinces where the latest human cases occurred.
This indicated that the virus was lurking undetected in poultry and waiting to be passed on to humans.
China has reported the latest cases to the World Health Organisation (WHO), as well as health authorities in Hong Kong, Macau and Taiwan, according to the China News Service.
The WHO had little immediate comment on Monday about the new developments.
"The ministry of health has informed the WHO of the two cases over the weekend, and we're prepared to offer technical support if they ask," said Nyka Alexander, a Beijing-based WHO spokeswoman.
Prior to this month's cases, and in addition to the fatalities, 10 Chinese were known to have contracted bird flu but survived.
According to the WHO, about 250 people have died from bird flu worldwide since 2003.
Scientists fear the virus could mutate to jump easily from human to human, potentially sparking a global pandemic.